Loma Negra — FY2023 Form 20-F Summary
Reporting period: Year ended December 31, 2023; this is an annual report, not a standalone fourth-quarter filing. The company reports under IFRS and applies IAS 29 hyperinflation accounting. Unless noted otherwise, peso figures below are in millions and financial statements are stated in constant pesos at December 31, 2023. Argentina’s 2023 inflation was 211.4%.
Business context
Loma Negra is an Argentine producer of cement and related construction materials, with concrete, aggregates, lime, waste-recycling and rail-freight operations. Management estimated its Argentine cement market share at 44.2%. Cement, masonry cement and lime production was 6.4 million tons in 2023, versus 6.5 million in 2022. Installed annual cement capacity was 12.1 million tons.
Key financial metrics
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Revenue | Ps. 422,161 | Ps. 451,954 | Down 6.6% |
| Gross profit / margin | Ps. 105,907 / 25.1% | Ps. 122,049 / 27.0% | Profit down 13.2%; margin down 1.9 percentage points |
| Profit before tax | Ps. 17,418 | Ps. 34,264 | Down 49.2% |
| Net profit | Ps. 9,681 | Ps. 5,627 | Up 72.0% |
| Net profit margin | 2.3% | 1.2% | Up 1.1 percentage points |
| Cash generated by operating activities | Ps. 85,030 | Ps. 97,664 | Down 12.9% |
| Capital expenditure on property, plant and equipment | Ps. 36,053 | Ps. 31,774 | Up 13.5% |
| Cash and cash equivalents at year-end | Ps. 6,734 | Ps. 15,293 | Down 56.0% |
| Total borrowings | Ps. 147,370 | Ps. 64,680 | Up substantially |
| Net debt | Ps. 140,636 | Ps. 49,388 | Up substantially |
Net profit improved despite lower revenue and gross profit, alongside lower income-tax expense and the inflation-related gain on net monetary position. These benefits were partly offset by a sharply larger foreign-exchange loss. Financial expenses were Ps. 73,323 million, including Ps. 61,853 million of interest expense. The filing does not provide a clear EBITDA figure in the supplied text.
At year-end, 76% of borrowings were U.S.-dollar denominated; 24% carried variable interest rates, principally BADLAR-linked. Average debt maturity was 1.7 years, and 25% of borrowings were current. The current ratio was 1.09, compared with 0.97 in 2022. The net-debt-to-equity ratio rose to 0.48 from 0.14.
Changes versus prior period
- Revenue declined as cement, masonry cement and lime sales volume fell 4.5% and average selling price fell 7.3%. The cement segment’s revenue decreased Ps. 45,652 million. Concrete and aggregates revenue increased, while rail revenue declined.
- Gross margin narrowed as the decrease in revenue exceeded the decline in cost of sales. Energy costs were lower in 2023, and management said normalization in thermal-energy prices supported results.
- Net cash from operations fell to Ps. 85,030 million. Investing cash outflow was Ps. 35,825 million, principally reflecting capital spending; financing cash outflow was Ps. 41,086 million.
- Financing cash flows included Ps. 142,487 million of bond issuance proceeds and Ps. 110,862 million of borrowing repayments. Dividends paid were Ps. 86,845 million, and interest paid was Ps. 54,374 million.
- Net debt increased as borrowings rose and cash balances declined. The company issued three U.S.-dollar bonds in 2023, maturing in 2025–2026, and a peso bond bearing BADLAR plus 2% and maturing in August 2024.
Outlook, risks and unusual items
- Demand and outlook: Management reported a downturn in cement demand in the first quarter of 2024 following policy changes, reduced public spending and weaker activity. It gave no specific numerical earnings or sales guidance in the supplied filing text. Recovery depends partly on Argentina’s economic stabilization and construction activity.
- Argentina exposure: GDP contracted 1.6% in 2023; inflation was 211.4%, and the peso depreciated 356.44% against the U.S. dollar at the official rate. Inflation restatement, currency movements, exchange controls, interest rates, wage pressure and government policy may materially affect results, costs, liquidity and the ability to remit funds.
- Rail concession: Ferrosur Roca’s provisional concession extension is due to end in September 2024 and may be revoked earlier without compensation. Management intends to continue as a railway operator under a changed operating model, but outcomes and financial effects remain uncertain. The auditor identified the concession assessment as a critical audit matter.
- Energy and construction exposure: Energy represented about 24% of cost of sales. Higher energy tariffs, subsidy reductions, supply constraints, fuel prices and weak construction activity could pressure margins and volume.
- Contingencies: At year-end, total claims in dispute were approximately Ps. 7,599 million; Ps. 2,168 million was provided for probable claims, while Ps. 4,925 million of possible claims was not provided. A U.S. securities class action settlement received final court approval in April 2024; the remaining payment was expected before October 11, 2024 and was stated to be covered by D&O insurance. An Argentine competition investigation remained ongoing, with no loss estimate recorded.
- Other significant matters: Management recorded no impairment of property, plant and equipment in 2023; the auditor identified impairment testing as a critical audit matter. The company reported effective disclosure controls and internal control over financial reporting, and the auditor gave unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Confirm the effects of Argentina’s inflation and exchange-control regime on reported constant-peso results, debt servicing and access to foreign currency.
- Track 2024 cement demand, pricing, shipment volumes and the extent to which energy and other cost increases can be passed through.
- Verify the post-September 2024 operating arrangements, costs and asset recoverability for Ferrosur Roca.
- Review debt maturities, refinancing needs, interest-rate exposure, cash availability and dividend capacity; compare planned distributions with operating cash generation.
- Monitor the competition investigation, remaining securities-settlement payment and insurance recovery, as well as unprovided possible claims.