Business context and reporting period
Loma Negra Compañía Industrial Argentina S.A. filed its annual Form 20-F for the fiscal year ended December 31, 2022—not a standalone fourth-quarter report. The company produces and sells cement, masonry cement, lime, concrete and aggregates, and operates freight rail and waste-recycling businesses, principally in Argentina. It reported an estimated 44.9% share of Argentina’s cement market by sales volume and production of 6.5 million tons of cement, masonry cement and lime, up from 6.0 million tons in 2021.
The audited statements are prepared under IFRS and restated into year-end pesos for Argentina’s hyperinflationary economy. The 2022 figures therefore reflect IAS 29 inflation accounting; peso comparisons should be interpreted in that context.
Financial and operating highlights
| Metric | FY2022 | FY2021 | Change / context |
|---|---|---|---|
| Revenue | Ps. 145,133 million | Ps. 143,501 million | Up 1.1% |
| Gross profit / margin | Ps. 39,193 million / 27.0% | Ps. 45,356 million / 31.6% | Profit down 13.6%; margin contracted 4.6 percentage points |
| Profit before tax | Ps. 11,003 million | Ps. 31,775 million | Down 65.4% |
| Net profit / margin | Ps. 1,807 million / 1.2% | Ps. 12,358 million / 8.6% | Net profit down 85.4% |
| Net cash from operating activities | Ps. 31,362 million | Ps. 29,316 million | Up about 7.0% |
| Capital expenditure | Ps. 10,203 million | Ps. 13,807 million | L’Amalí expansion was completed; 2022 spending was principally maintenance |
| Borrowings / net debt | Ps. 20,770 million / Ps. 15,859 million | Ps. 4,892 million / net cash of Ps. 5,376 million | Net debt rose materially |
| Cash and cash equivalents | Ps. 4,911 million | Ps. 6,439 million | Includes short-term investments |
| Working capital / current ratio | Negative Ps. 1,459 million / 0.97 | Current ratio 1.15 | Negative working capital at year-end |
Revenue growth reflected higher volumes across cement, concrete, aggregates and rail, partly offset by an 8.9% decline in the average selling price in the cement, masonry cement and lime segment. Cost of sales rose 7.9%, driven by higher volumes, energy and freight costs, and depreciation. Energy represented approximately 25% of cost of sales.
Financial results swung from a small gain in 2021 to a Ps. 17,609 million loss in 2022. The 2022 result included a Ps. 17,636 million loss on securities transactions, higher interest expense, and exchange-rate losses, partly offset by a larger gain on the net monetary position. Other gains and losses included a Ps. 3,370 million gain on disposal of property, plant and equipment, mainly a non-strategic property sale. The filing reports no standalone Q4 results.
Material changes versus the prior comparable period
- Net profit fell sharply despite modest reported revenue growth, as costs rose faster than revenue and financial results deteriorated.
- Cement, masonry cement and lime volumes increased 9.7%, but the segment’s average selling price declined 8.9%. Concrete volume rose 11.0%; aggregates volume rose 48.1%.
- Cost pressure was significant: the filing cites higher unit energy costs, freight costs and depreciation following completion of the L’Amalí expansion.
- Borrowings increased to Ps. 20,770 million from Ps. 4,892 million, while the company moved from net cash to net debt. The average debt maturity was 0.7 years, and 85% of borrowings carried variable rates.
- Operating cash flow increased, but financing outflows included Ps. 21,806 million of dividends, Ps. 4,756 million of interest paid and Ps. 1,797 million of share repurchases. Cash and cash equivalents ended the year lower.
- The filing presents 2022 reported revenue growth in constant year-end pesos; Argentine CPI inflation was 94.8%, and the official peso depreciated approximately 72% against the U.S. dollar during 2022.
Outlook, management commentary, risks and unusual items
Management said the completed L’Amalí second line increased annual installed cement capacity by 2.7 million tons and that capital spending needs had fallen, with future investment principally for maintenance and conversion of cement bags to the required 25-kilogram format. The bagging requirement was deferred to October 2, 2023; the company expects adaptation spending. No specific company financial guidance was provided.
The filing’s Argentina growth outlook is inconsistent: the trend discussion says economic activity was expected to grow about 5% in 2023, while the financial-statement note cites an IMF forecast of about 0.2%. It also flags drought-related pressure on exports and tax receipts, constrained foreign-currency reserves, high inflation and peso depreciation. These are country-level forecasts, not company guidance.
Key risks include Argentina’s inflation, currency and exchange-control environment; restrictions on importing goods and transferring funds abroad; energy and freight price volatility or shortages; and sensitivity of cement demand to construction activity. The company also faces competition, environmental and mining regulation, and uncertainty about its railway business. Ferrosur Roca’s concession was temporarily extended to September 2024, but the extension may be revoked at any time without compensation; the post-concession operating model remains uncertain.
Contingencies include a certified U.S. state class action related to the 2017 IPO, now in discovery, and an Argentine antitrust investigation opened in 2022. The federal U.S. class action was dismissed with final effect. The filing records Ps. 594 million of provisions for probable claims and Ps. 1,837 million of possible claims; another summary gives a different aggregate amount for claims, so the amounts should be reconciled. The auditor issued an unqualified opinion on the financial statements and on internal control over financial reporting. Management said disclosure controls were effective after remediation of a prior-year disclosure deficiency.
After year-end, the company issued Class 1 corporate notes on February 22, 2023, with face value Ps. 25,636 million (equivalent to US$133.3 million), bearing interest at BADLAR plus 2% and maturing in 18 months. This is a material subsequent financing event, not year-end debt.
Important facts for investors to verify
- Reconcile the Ps. 17,636 million securities-transaction loss, its connection to foreign-currency debt settlements, and the resulting borrowing and cash-flow presentation.
- Review near-term debt maturities, variable-rate exposure, covenant headroom and the use of the February 2023 corporate-note proceeds, especially given negative working capital and the short average debt maturity.
- Clarify the inconsistent 2023 Argentina GDP forecasts in the filing and distinguish country assumptions from any company-specific outlook.
- Track Ferrosur Roca’s concession and post-September 2024 arrangements, including potential revocation, infrastructure access, fees and asset recoverability.
- Confirm the status and exposure of the U.S. securities class action and Argentine antitrust investigation; reconcile the differing claim totals and provisions disclosed in the filing.
- Assess whether pricing can keep pace with energy, freight, labor and other inflation-sensitive costs, and verify the investment required to meet the 25-kilogram bag rule.
- Interpret peso-denominated trends with the IAS 29 restatement and verify the effect of inflation accounting and currency restrictions on cash, earnings and shareholder distributions.