Loma Negra Reports 2Q18 Results

BUENOS AIRES, Argentina--(BUSINESS WIRE)-- Loma Negra (NYSE: LOMA) (BYMA: LOMA), (“Loma Negra” or the “Company”), the leading cement producer in Argentina, today announced results for the three and six-month periods ended June 30, 2018.

2Q18 Key Highlights

• Net revenue up 37.2% YoY to Ps.4,757 million (US$202 million) mainly driven by growth in core business Cement, masonry & lime in Argentina and Concrete
• Argentina Cement, masonry & lime net revenues up 33.4% despite relatively flat sales volumes
• Consolidated Adjusted EBITDA rose 26.9% YoY to Ps.1,153 million (US$49 million), mainly driven by the 36.6% increase in Adjusted EBITDA from the Cement, masonry, and lime segment in Argentina to Ps. 982 million (US$42 million).
• Adjusted EBITDA margin of the Cement, masonry, and lime segment in Argentina expanded by 65 basis points YoY to 28.0%, while consolidated Adjusted EBITDA margin contracted by 197 basis points from 26.2% to 24.2%.
• Net Debt /LTM Adjusted EBITDA ratio of 0.83x from 1.44x in 2Q17 and 0.3x in FY17

Commenting on the financial and operating performance for the second quarter of 2018, Sergio Faifman, Loma Negra’s Chief Executive Officer, noted: “Our core business, Cementin Argentina, continued to deliver a solid performance, posting both revenue growth and EBITDA margin expansion despite the current challenging macroeconomic environment in the country.This was achieved despite relatively flat volumes year-on-year, as we continue with our strategy of balancing profitability and market position. Sustained growth in concrete volume demand, by contrast, was supported by ongoing implementation of public infrastructure projects in our key markets.”

“As such, despite the improving margins in our core business, the consolidated Adjusted EBITDA margin contracted in the period, mainly reflecting a poor railway performance and strong growth of the lower margin concrete business.”

“Looking ahead, we remain cautiously optimistic with the outlook of the cement demand in Argentina. Despite the potential impact of an adverse macro environment in the second half of the year, and given current market conditions, we believe the industry could reach similar record volumes achieved last year.”

“We also have confidence in the long-term prospects for our business, supported by our leading market position and strong balance sheet, and we continue to move ahead and make progress with the expansion of our L’Amalí plant that will drive profitability gains and provide additional capacity.”

Overview of Operations

Sales Volumes

²Sales volumes include inter-segment sales

The challenging macroenviorenment in 2Q18 prevented sales volumes of cement, masonry and lime in Argentina to grow, remaining almost flat YoY at 1.49 million tons. Sales volumes in Paraguay fell 2.4% in the period to 0.13 million tons, mainly due to the high utilization rate and the lower inventory levels compared to the prior year. As a result, consolidated total sales volumes of cement, masonry and lime for the quarter decreased 0.7% YoY to 1.61 million tons.

Concrete volumes in Argentina, increased 23.7% YoY to 0.25 million m³ mainly driven by a good progress in public infrastructure works, principally in the metropolitan area of Buenos Aires.

In 2Q18, aggregate volumes declined 7.4% YoY to 0.25 million tons. This also affected volumes at Ferrosur, which declined 6.1% to 1.16 million tons principally reflecting lower transported volumes of own and third-party aggregates.

Review of Financial Results

Net Revenues

Net revenue increased 37.2% to Ps.4,757 million in 2Q18, from Ps.3,467 million in the comparable quarter last year, mainly driven by revenue growth in the Cement, masonry and lime segments in Argentina and Paraguay, and further supported by continued growth in the Concrete segment.

Cement, masonry and lime revenues in Argentina were up 33.4% YoY, to Ps.3,503 million despite volumes remaining almost flat. Cement revenues in Paraguay increased 49.2%, reaching Ps.369 million in the quarter as the 2.4% YoY decline in volume was more than offset by Paraguayan Guarani appreciation against the Argentine peso and better local pricing.

Concrete revenues rose 80.3% YoY to Ps.790 million driven by volume growth and higher prices. In addition, Railroad revenues rose 24.9% to Ps.485 million, slightly below inflation mainly reflecting lower transported volumes, partially compensated by higher prices. Aggregates revenues were up 6.0% to Ps.69 million during the period, reflecting a 7,4% decline in volumes and a significantly higher share of FOB sales in the quarter.

Cost of sales increased 40.9% YoY reaching Ps.3,426 million in 2Q18. In Cement, masonry and lime in Argentina cost of sales increased 31.7% YoY, principally reflecting the impact of the peso depreciation on the Company’s cost structure, mainly in thermal and electricity costs.

Gross profit rose28.5% YoYto Ps.1,331 million in the second quarter of 2018 from Ps.1,035 million in same quarter of last year, with gross profit margin contracting 189 basis points YoY to 28.0%. The Cement, masonry and lime segment in Argentina reported an YoY improvement of 88 basis points in gross margin reaching 33.4%, that was more than offset by lower transported volumes in the Railroad segment, robust growth in the lower-margin Concrete segment, and a slight decrease in gross profit of the Cement segment in Paraguay.

Selling and Administrative Expenses

Selling and administrative expenses (SG&A) in 2Q18 rose 33.6% YoY to Ps.365 million, from Ps.273 million in 2Q17, affected by expenses resulting from the obligations of being a publicly listed company. Notwithstanding, as a percentage of revenues, SG&A declined 20 basis points to 7.7% in 2Q18 from 7.9% in 2Q17 principally due to higher cost dilution along with a reduction in the effective sales tax rate.

Adjusted EBITDA & Margin

Adjusted EBITDA increased 26.9% year-over-year in the second quarter of 2018 to Ps.1,153 million, mainly driven by the Cement segments in Argentina and Paraguay.

Adjusted EBITDA Margin, however,declined 197 basis points to 24.2% compared to 26.2% in 2Q17, mostly as a result a poor Railroad segment performance and strong growth in lower margin-Concrete revenues during the period.

Adjusted EBITDA for the Cement segment in Argentina, which represented 85% of the consolidated adjusted EBITDA in 2Q18, increased 36.6% YoY to Ps.982 million. Adjusted EBITDA margin expanded 65 basis points to 28.0% during the period.

The Cement segment in Paraguay, reported a 33.7% increase in Adjusted EBITDA reaching Ps.125 million, while the Adjusted EBITDA margin contracted 395 basis points to 33.9%, due to a temporary purchase of third-party clinker. Furthermore, while the Concrete segment reported a 49.2% increase in Adjusted EBITDA reaching Ps.27 million, the Adjusted EBITDA margin contracted 71 basis points.

By contrast, Adjusted EBITDA for the Railroad segment fell 76.4% to Ps.16 million in the second quarter of 2018, with Adjusted EBITDA margin contracting to 3.2% from 17.1% in 2Q17 as a result of lower dilution of fixed costs primarily due to a decline in transported volumes of aggregates.

Finance Costs-Net

During 2Q18, total finance costs-net increased by 129.3% YoY to Ps.671 million, principally as a result of higher foreign exchange differences, resulting from the peso depreciation in the period.

In 2Q18, the Company reported foreign exchange loss of Ps.515 million, mostly driven by non-cash losses, as a result of the 43.3% peso depreciation in the net debt position in foreign currency, as compared to a Ps.130 million loss in 2Q17 when the peso depreciated 7.9%.

Net Financial expense, decreased by Ps.7 million as a result of increases in both the cash balance and interest rates.

Net Profit and Net Profit Attributable to Owners of the Company

Net Profit for the second quarter of 2018, decreased 39,3% to Ps.178 million from Ps.293 million in 2Q17. The effective tax rate declined to 30.7% in 2Q18 from 32.2% in the year-ago period, as a result of the adjustment in deferred taxes in Argentina from the Tax Reform enacted on December 2017 which reduced the income tax rate from 35% to 30% in 2018 and 2019, and to 25% thereafter.

Net Profit Attributable to Owners of the Company declined 35% YoY, or Ps.97 million, to Ps.179 million in 2Q18. During the quarter, the Company reported earnings per common share of Ps.0.3010 and earnings per ADR of Ps.1.5500, compared with earnings per share of Ps.0.4878 and earnings per ADR of Ps.2.4390 in 2Q17.

Capitalization

As of June 30, 2018, total cash and cash equivalents were Ps.1,618 million down from Ps.3,180 million as of the end of 2017 mainly due to increased capex investments along with seasonally higher working capital needs. Total debt at the close of the quarter was Ps.5,390 million, composed by Ps.2,872 million in short-term borrowings, including the current portion of long-term borrowings (or 53% of total borrowings), and Ps.2,518 million in long-term borrowings (or 47% of total borrowings).

As of June 30, 2018, 38.5%, or Ps.2,077 million, Loma Negra’s total debt was denominated in U.S. dollars, 39.6% (or Ps.2,135 million) in Guaraníes, and 21.9% (or Ps.1,178 million) in Argentine pesos, with an average duration of 1.9 years.

At the close of 2Q18, Ps.2,895 million, or 53.7%, of the Company’s total consolidated borrowings bore interest at floating rates, including Ps.205 million of Peso-denominated borrowings that bore interest at rates based on the Buenos Aires Deposits of Large Amount Rate, or BADLAR, Ps.2,033 million of foreign currency-denominated borrowings that bore interest at rates based on Libor, and Ps.657 million of borrowings with other floating interest rate.

The Net Debt to Adjusted EBITDA (LTM) ratio declined to 0.83x in 2Q18 from 1.44x as of June 30, 2017 reflecting the IPO proceeds and the use of funds in operations and investing activities.

Cash Flows

During the six-month period ended June 30, 2018, total capital expenditures were Ps.1,314 million, 52% directed to the expansion of production capacity of L´Amalí plant. Cash flow generated by operating activities as of June 30, 2018 was Ps.153 million compared to Ps.558 million in the year ago period explained mainly by higher working capital needs this quarter, mainly regarding inventories higher replacement cost and maintenance stoppage schedule requirements.

Expansion of L’Amalí Plant.

Loma Negra is moving ahead with the capital expenditure at its L’Amalí plant, which will add 2.7 million tons annually and drive higher profitability. This expansion involves a total capital expenditure of approximately US$350 million, and is expected to be completed early 2020.

For this project, the Company contracted Sinoma International Engineering Co. Ltd. (“Sinoma”) for the construction of the new cement production line with a capacity of 5,800 tons per day of clinker. The agreement includes the engineering, provision and shipment of all the equipment for the plant and its construction.

Basic engineering of the new plant and study of soil in situ was completed in 4Q17. The Company continued to make progress with overall project execution during the quarter. First equipments are to arrive before 2018YE. The local manufacturer for the steel structure was contracted. Electromechanical construction works are under final selection process. Civil works for major equipment remain on schedule. Additions to Property, Plant and Equipment related to this project during 2Q18 amounted to Ps.154 million.

Recent Events

Argentina to become Hyperinflationary economy

Inflation indices of Argentina were released showing a three-year cumulative rate in excess of 100 percent, indicating that the Argentinian economy is, as defined by IAS 29, hyperinflationary.

In light of the stated preferences in IAS 29 that all entities apply inflation accounting from the same time and using the same general price index, the use of inflation accounting will be applied in respect of Argentinian peso functional operations for periods ending after July 1st, 2018.

The Company is evaluating the effects on the interim financial statements which will be considered for subsequent reporting periods

Definitions

Adjusted EBITDA is calculated as net profit plus financial interest, net plus income tax expense plus depreciation and amortization plus exchange rate differences plus other financial expenses, net plus tax on debits and credits to bank accounts. Loma Negra believes that excluding tax on debits and credits to bank accounts from its calculation of Adjusted EBITDA is a better measure of operating performance when compared to other international players.

Net Debt is calculated as borrowings less cash and cash equivalents.

About Loma Negra

Founded in 1926, Loma Negra is the leading cement company in Argentina, producing and distributing cement, masonry cement, aggregates, concrete and lime, products primarily used in private and public construction. Loma Negra is a vertically-integrated cement and concrete company, with nationwide operations, supported by vast limestone reserves, strategically located plants, top-of-mind brands and established distribution channels. The Company also owns a 51% equity stake in an integrated cement production plant in Paraguay, which is one of two leading cement producers in that country. Loma Negra is listed both on BYMA and on NYSE in the U.S., where it trades under the symbol “LOMA”. One ADS represents five (5) common shares. For more information, visit www.lomanegra.com.

Note

The Company presented some figures converted from Pesos to U.S. dollars for comparison purposes. The exchange rate used to convert Pesos to U.S. dollars was the reference exchange rate (Communication “A” 3500) reported by the Central Bank for U.S. dollars.The information presented in U.S. dollars is for the convenience of the reader only.Certain figures included in this report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be arithmetic aggregations of the figures presented in previous quarters.

Disclaimer

This release contains forward-looking statements within the meaning of federal securities law that are subject to risks and uncertainties. These statements are only predictions based upon our current expectations and projections about possible or assumed future results of our business, financial condition, results of operations, liquidity, plans and objectives. In some cases, you can identify forward-looking statements by terminology such as “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “potential,” “seek,” “forecast,” or the negative of these terms or other similar expressions. The forward-looking statements are based on the information currently available to us. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including, among others things: changes in general economic, political, governmental and business conditions globally and in Argentina, changes in inflation rates, fluctuations in the exchange rate of the peso, the level of construction generally, changes in cement demand and prices, changes in raw material and energy prices, changes in business strategy and various other factors. You should not rely upon forward-looking statements as predictions of future events. Although we believe in good faith that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Any or all of Loma Negra’s forward-looking statements in this release may turn out to be wrong. You should consider these forward-looking statements in light of other factors discussed under the heading “Risk Factors” in the prospectus filed with the Securities and Exchange Commission on October 31, 2017 in connection with Loma Negra’s initial public offering. Therefore, readers are cautioned not to place undue reliance on these forward-looking statements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this release to conform these statements to actual results or to changes in our expectations.

View source version on businesswire.com: https://www.businesswire.com/news/home/20180809005804/en/

Loma Negra
IR Contacts
Marcos I. Gradin, Chief Financial Officer and Investor Relations
or
Gastón Pinnel, Investor Relations Manager
+54-11-4319-3050
[email protected]

Source: Loma Negra