LOMA — Loma Negra Compañía Industrial Argentina Sociedad Anónima

Loma Negra Q3 2024 Earnings Call Summary

1. Key Financial Results and Metrics

• Revenue: ARS 180.7 billion, down 21.2% year-over-year due to lower cement dispatches.
• Adjusted EBITDA: USD 55 million (ARS 43 billion), down 18.5% year-over-year; EBITDA margin improved to 24%, up 78 basis points.
• Net Profit: ARS 20.9 billion, compared to ARS 22.9 billion in Q3 2023.
• Net Debt: ARS 172 billion, with a net debt-to-EBITDA ratio of 1.03x, down from 1.4x at the end of 2023.
• Cash Generation: ARS 64 billion from operational activities, up from ARS 45 billion in Q3 2023.

2. Strategic Updates and Business Highlights

• The cement industry showed a sequential volume improvement of 25%, indicating a recovery from previous lows.
• Bulk cement dispatches are recovering faster than bag cement, reaching 62% of dispatches.
• Cost management strategies helped mitigate the impact of higher energy costs, with a significant increase in the share of renewable energy used in production.
• Capital expenditures totaled ARS 17.4 billion, with a focus on the 25-kilogram bags project and maintenance CapEx.

3. Forward Guidance and Outlook

• The company is optimistic about the economic recovery, citing improved real wages, declining inflation, and lower interest rates as potential catalysts for growth.
• Anticipated growth in the construction sector is linked to the recovery of the mortgage market and public-private partnerships in infrastructure projects.
• Management expects to see a continued increase in cement volumes, potentially leading to double-digit growth next year.

4. Bad News, Challenges, or Points of Concern

• Revenue decline of 21.2% reflects ongoing challenges in the construction sector, particularly in public works and larger private projects.
• The aggregates segment experienced a significant decline in sales volume (29%) and revenue (42.7%).
• Seasonal factors, such as increased energy costs during winter, impacted margins and overall profitability.
• The competitive landscape remains challenging, with reduced activity levels affecting pricing and sales.

5. Notable Q&A Insights

• Pricing Dynamics: The company is adjusting prices monthly but may shift to quarterly adjustments as inflation stabilizes, to avoid larger price hikes.
• Bulk Cement Demand: Recovery in larger construction projects is expected to drive demand for bulk cement, with management monitoring public works developments closely.
• Dividends: No immediate plans for dividend increases; management is evaluating capital allocation strategies for future shareholder returns.
• Mortgage Market Recovery: There are signs of recovery in real estate sales and mortgage activity, which could positively impact future construction and cement sales.

Overall, Loma Negra is navigating a challenging economic environment but is positioned for potential growth as market conditions improve. The company remains focused on cost management and strategic investments to enhance operational efficiency and capitalize on recovery trends in the construction sector.