Business Context and Reporting Period
This Form 6-K filing by Loma Negra Compania Industrial Argentina Sociedad Anonima covers the first quarter ended March 31, 2019, with the report dated May 9, 2019. The company operates in the cement, concrete, railroad, and aggregates sectors across Argentina and Paraguay. Financial results are reported under International Financial Reporting Standards (IFRS), specifically applying IAS 29 for hyperinflationary economies starting July 1, 2018. The filing includes a presentation of "As Reported" results and selected figures excluding IAS 29 adjustments for comparability.
Key Financial Metrics
- Net Revenues: AR$7.4 billion (US$183 million), an increase of 3.6% year-over-year.
- Adjusted EBITDA: AR$2.1 billion (US$54 million), up 17.9% year-over-year.
- Adjusted EBITDA Margin: Expanded 347 basis points to 28.7% (30.5% excluding non-recurrent structure adequacy expenditures).
- Net Majority Income: AR$1.1 billion (US$26 million), up 47.7% year-over-year.
- Gross Profit: Increased 28.6% year-over-year with a gross margin of 28.8%.
- Liquidity and Debt: Cash position of AR$1.5 billion; Total debt of AR$6.4 billion; Net Debt of AR$4.9 billion (US$113 million).
- Net Debt Ratio: Net Debt to LTM Adjusted EBITDA ratio of 0.59x.
- Operating Cash Flow: Net cash generated by operating activities was AR$558 million in 1Q19, compared to a use of AR$84 million in 1Q18.
Material Changes Versus Prior Period
Revenue growth of 3.6% was achieved despite a 13.4% contraction in Argentine cement volumes, driven by favorable pricing dynamics and growth in other segments. Paraguay cement revenue surged 33.9% due to volume growth and currency appreciation. Concrete revenue rose 10.6% supported by infrastructure works, while Aggregates revenue increased 21.7% on pricing despite a slight volume decline. Railroad revenue fell 1.6% due to economic slowdown.
Profitability improved significantly, with Adjusted EBITDA rising 17.9% and Net Profit increasing 47.7%. The effective tax rate decreased to 16.0% from 23.7% in the prior year. However, net financial expenses increased due to higher interest rates and foreign exchange losses of AR$161 million compared to AR$69 million in 1Q18.
Guidance, Outlook, and Risks
Management expects cement demand to recover by mid-2019 following an economic turnaround. The L'Amalí Expansion Plant remains on track with an updated start-up date in the second quarter of 2020. Capital expenditures for 1Q19 totaled AR$1.9 billion, with 67% allocated to the L'Amalí expansion.
Key risks include Argentina's hyperinflationary environment, exchange rate fluctuations, changes in construction activity, and raw material/energy price volatility. The filing includes standard forward-looking statement disclaimers noting that actual results may differ materially from projections due to economic, political, and business conditions.
Investor Verification Checklist
- Verify the impact of IAS 29 hyperinflation accounting on reported figures versus underlying operational performance.
- Confirm the timeline and capital requirements for the L'Amalí plant expansion start-up in 2Q20.
- Monitor the trajectory of Argentine cement volumes and pricing power amidst the economic slowdown.
- Assess the sustainability of the 0.59x Net Debt to LTM Adjusted EBITDA ratio given rising interest rates and FX exposure.
- Review the reconciliation of US dollar figures, which are derived from peso figures using average exchange rates and pre-IFRS 29 data.