Business Context and Reporting Period
Loma Negra Compania Industrial Argentina Sociedad Anonima (Loma Negra) filed a Form 6-K on May 13, 2021, reporting results for the first quarter of 2021 (1Q21). The company operates in the cement, masonry, lime, concrete, railroad, and aggregates sectors in Argentina. Financial results are presented in Argentine Pesos (Ps.) and converted to U.S. dollars for convenience using the Central Bank reference rate. Due to Argentina's classification as a highly inflationary economy, the company applies IAS 29, restating results to adjust for changes in the purchasing power of the local currency.
Key Financial Metrics
- Net Revenues: Ps. 13.2 billion (US$ 143 million).
- Adjusted EBITDA: Ps. 4.7 billion (US$ 52 million).
- Net Majority Income: Ps. 2.6 billion (US$ 37 million).
- Consolidated Adjusted EBITDA Margin: 35.7%.
- Gross Margin: 36.2%.
- Net Debt: Ps. 640 million (US$ 7 million) as of March 31, 2021.
- Net Debt to LTM Adjusted EBITDA: 0.04x.
- Cash and Cash Equivalents: Ps. 4.36 billion at period end.
- Operating Cash Flow: Ps. 2.93 billion generated in 1Q21.
- Capital Expenditures: Ps. 1.0 billion (28% allocated to L'Amalí expansion).
- Share Repurchases: Ps. 255 million in 1Q21.
Material Changes Versus Prior Period
Compared to 1Q20, the company reported significant growth across key metrics:
- Revenue Growth: Net revenues increased 35.4% YoY, driven by volume recovery across all segments.
- Profitability: Adjusted EBITDA rose 49.6% YoY, with the margin expanding 341 basis points to 35.7%. Net profit attributable to owners surged 104.4% YoY.
- Segment Performance:
- Cement, Masonry & Lime: Revenue up 38.4% (volumes +38.0%).
- Concrete: Revenue up 64.8% (volumes +104.6%), partially offset by softer pricing.
- Aggregates: Revenue up 47.3% (volumes +42.5%).
- Railroad: Revenue decreased 12.7% due to poor pricing performance despite a 5.0% volume increase.
- Balance Sheet: Net debt decreased significantly from Ps. 18.3 billion in 1Q20 to Ps. 640 million in 1Q21. The Net Debt/LTM Adj. EBITDA ratio improved from 0.16x to 0.04x.
- Financial Costs: Net financial expense declined by Ps. 70 million to Ps. 438 million, aided by a foreign exchange gain of Ps. 21 million compared to a loss of Ps. 239 million in the prior year.
Guidance, Outlook, and Risks
Outlook: Management expects cement demand to stabilize around pre-pandemic levels with moderate growth for the remainder of 2021. The L'Amalí plant expansion is advancing toward completion, with the clinker line start-up expected in the coming days and full commissioning within the next few months.
Risks and Contingencies: The filing highlights risks associated with Argentina's macroeconomic context, including high inflation, exchange rate fluctuations, and political conditions. The potential impact of a second wave of Covid-19 on the resumption of large construction projects is noted as a source of uncertainty. Forward-looking statements are subject to these risks and should not be relied upon as predictions of future events.
Investor Verification Checklist
- Verify the specific exchange rate used for USD conversions, as figures are derived from Pesos using the Central Bank reference rate.
- Confirm the impact of IAS 29 hyperinflation accounting on reported margins and year-over-year comparisons.
- Monitor the timeline for the full commissioning of the L'Amalí plant expansion and its effect on future capacity.
- Assess the sustainability of the 35.7% Adjusted EBITDA margin given the volatility in raw material and energy prices in Argentina.
- Review the company's exposure to foreign currency debt and the potential impact of further peso devaluation on financial results.