Loma Negra pania Industrial Argentina Sociedad Anonima(LOMA) - 2023 Q3 - Quarterly Report

Introduction & Disclaimers Disclaimer and Forward-Looking Statements The report contains forward-looking statements based on current expectations that are subject to risks and uncertainties - Forward-looking statements are based on current expectations and projections, subject to risks and uncertainties, and should not be relied upon as predictions of future events[3][4] - Important factors could cause actual results to differ materially, including changes in economic, political, governmental, and business conditions, inflation rates, exchange rates, and industry-specific factors[4] - The company undertakes no obligation to publicly update any forward-looking statements after the release date, except as required by law[5] Accounting Standards Note (IAS 29) Financials are prepared under IFRS, applying IAS 29 for Argentina's highly inflationary economy since July 2018 - Loma Negra's financial information is prepared in accordance with IFRS, applying IAS 29 due to Argentina's highly inflationary economy status since July 1, 2018[7] - Results are reported as if the economy were highly inflationary as of January 1, 2018, adjusting for changes in the general purchasing power of the local currency[7] - For better understanding, selected figures are also disclosed 'As Reported' (excluding IAS 29)[7] Q3 2023 Highlights & Overview Key Financial Highlights The company reported resilient volumes and effective cost control, leading to margin expansion and a solid balance sheet - The Cement business demonstrated resilience despite a moderate decrease in volumes, contributing to solid results[9] Q3 2023 Key Financial Highlights (As Reported) | Metric | Value (AR$ billion) | YoY Change (AR$) | Value (US$ million) | YoY Change (US$) | | :-------------------------------- | :------------------ | :--------------- | :------------------ | :--------------- | | Net Revenues | 74.2 | -8.3% | 212 | -10.1% | | Adjusted EBITDA | 17.2 | -3.9% | 66 | -3.1% | | Net Profit | 7.5 | N/A | N/A | N/A | | Consolidated Adjusted EBITDA Margin | 23.2% | +105 bps | N/A | N/A | | Net Debt to LTM Adj. EBITDA ratio | 0.97x | N/A | N/A | N/A | - The company issued Class III domestic bonds for US$ 55.0 million to refinance existing debt, extending maturity and reducing financial costs[11] Macro & Industry Context Construction Activity & Economic Trends Argentinian construction activity and cement sales remained resilient despite economic uncertainty and GDP fluctuations GDP Growth (YoY Growth, %) | Year/Quarter | 2019 | 2020 | 2021 | 2022 | 2023e | 2024e | 2025e | | :------------- | :--- | :--- | :--- | :--- | :---- | :---- | :---- | | GDP Growth (%) | 1.4 | -9.9 | 10.4 | 5.0 | -2.8 | 1.5 | 3.0 | Monthly Industry Cement Sales ('000 tons) - 2023 vs. Previous Years | Month | 2019 | 2020 | 2021 | 2022 | 2023 | | :---- | :--- | :--- | :--- | :--- | :--- | | Jan | ~900 | ~800 | ~950 | ~1000 | ~1050 | | Feb | ~850 | ~750 | ~900 | ~950 | ~1000 | | Mar | ~950 | ~800 | ~1000 | ~1050 | ~1100 | | Apr | ~900 | ~700 | ~950 | ~1000 | ~1050 | | May | ~950 | ~850 | ~1000 | ~1050 | ~1100 | | Jun | ~900 | ~800 | ~950 | ~1000 | ~1050 | | Jul | ~900 | ~850 | ~950 | ~1000 | ~1050 | | Aug | ~900 | ~850 | ~950 | ~1000 | ~1050 | | Sep | ~900 | ~850 | ~950 | ~1000 | ~1050 | | Oct | ~900 | ~850 | ~950 | ~1000 | ~1050 | | Nov | ~900 | ~850 | ~950 | ~1000 | ~1050 | | Dec | ~900 | ~850 | ~950 | ~1000 | ~1050 | Industry Cement Sales by Type (%) | Year | Bulk | Bags | | :--- | :--- | :--- | | 2019 | 58% | 42% | | 2020 | 58% | 42% | | 2021 | 61% | 39% | | 2022 | 70% | 30% | Revenue and Volumes Performance Segmental Revenue and Volume Analysis Q3 2023 total net revenues declined, driven by contractions in Cement and Concrete, while Aggregates revenue grew Q3 2023 Sales Volumes and Revenues by Segment | Segment | Unit | 3Q23 Volume | 3Q22 Volume | Volume % Chg. | 3Q23 Revenue (AR$ million) | 3Q22 Revenue (AR$ million) | Revenue % Chg. | | :---------------------- | :--- | :---------- | :---------- | :------------ | :------------------------- | :------------------------- | :------------- | | Cement, masonry & lime | MM Tn | 1.74 | 1.88 | -7.1% | 62,583 | 71,757 | -12.8% | | Concrete | MM m3 | 0.15 | 0.17 | -9.4% | 6,766 | 7,062 | -4.2% | | Railroad | MM Tn | 1.16 | 1.21 | -4.2% | 5,849 | 6,126 | -4.5% | | Aggregates | MM Tn | 0.34 | 0.34 | 0.2% | 2,328 | 1,982 | 17.5% | | Total Net Revenues | | | | | 74,182 | 80,878 | -8.3% | - Cement, masonry & lime revenue decreased 12.8% YoY, with volumes contracting 7.1%, partially offset by price adjustments due to higher monthly inflation[17] - Aggregates revenue increased 17.5% YoY, boosted by positive price performance while volume remained flat[17] Business Performance & Profitability Gross Profit and Margin Analysis Consolidated gross profit was stable while gross margin expanded due to cost improvements and lower SG&A expenses Q3 2023 Gross Profit & Margin | Metric | 3Q23 (AR$ Million) | 3Q22 (AR$ Million) | % Change | | :---------------- | :----------------- | :----------------- | :------- | | Gross Profit | 17,251 | 17,222 | 0.2% | | Gross Margin | 23.3% | 21.3% | +200 bps | | SG&A | 6,157 | 6,270 | -1.8% | | SG&A as % of Sales | 8.3% | 7.8% | +55 bps | - Gross margin expansion was primarily driven by cost improvements in the Cement segment and Railroad operation, despite a softer top line[21] - Margin expansion in Cement and Railroad segments was partially offset by contraction in Concrete[21] Adjusted EBITDA Generation Consolidated Adjusted EBITDA margin expanded significantly, driven by strong performance in the Cement and Railroad segments Q3 2023 Consolidated Adjusted EBITDA | Metric | 3Q23 (AR$ Million) | 3Q22 (AR$ Million) | % Change (AR$) | 3Q23 (US$ Million) | % Change (US$) | | :-------------------------- | :----------------- | :----------------- | :------------- | :----------------- | :------------- | | Adjusted EBITDA | 17,189 | 17,890 | -3.9% | 66 | -3.9% | | Adjusted EBITDA Margin | 23.2% | 22.1% | +105 bps | N/A | N/A | - Cement, masonry cement and lime segment Adjusted EBITDA margin expanded by 252 bps YoY to 26.8%, driven by cost improvements[23] - Railroad Adjusted EBITDA margin expanded by 428 bps YoY to 4.2%, also explained by cost improvements[23] - Concrete Adjusted EBITDA contracted 179 bps to 0.6%, and Aggregates Adjusted EBITDA margin was down 738 bps to 4.8%[23] Financial Performance: Bottom Line & Balance Sheet Net Profit Recovery Net profit recovered from a prior-year loss, driven by lower financial expenses and gains on net monetary position Q3 2023 Net Profit and Finance Items | Metric | 3Q23 (AR$ Million) | 3Q22 (AR$ Million) | Change | | :------------------------------------ | :----------------- | :----------------- | :----- | | Net Profit Attributable to Owners | 7,398 | (28,936) | N/A | | Total Finance Cost (Net) | 1,600 | 36,400 | -95.6% | | Foreign Exchange Loss | 16,500 | 2,100 | +685.7% | | Gain on Net Monetary Position | 29,000 | 8,800 | +229.5% | | Net Financial Expense | 14,000 | 43,000 (loss) | -67.4% | - The significant reduction in net financial expense was primarily due to the cancellation of dollar-denominated debt with local funding in 3Q22[27] - Adjusted EBITDA decreased by 3.9% YoY, impacting the bottom line[27] Balance Sheet & Cash Flow Highlights The company maintained a strong balance sheet with a healthy cash position and manageable debt despite lower operating cash flow Q3 2023 Balance Sheet & Debt Metrics | Metric | Value (AR$ billion) | Value (US$ million) | | :-------------------------- | :------------------ | :------------------ | | Cash position & Investments | 20.9 | N/A | | Total Debt | 96.1 | N/A | | Net Debt | 75.1 | 215 | | Net Debt/LTM Adj. EBITDA | 0.97x | N/A | Q3 2023 Cash Flow Highlights (AR$ million) | Metric | 3Q23 | 3Q22 | | :------------------------------------ | :----- | :----- | | Net cash generated by operating activities | 14,613 | 27,265 | | Net cash generated by (used in) investing activities | (4,311) | (1,845) | | Net cash used in by financing activities | (19,808) | (46,350) | | Cash and cash equivalents at period end | 20,909 | 8,257 | - Operating cash generation reached AR$ 14.6 billion in 3Q23, down from AR$ 27.3 billion in 3Q22, due to lower net profit adjusted for operating activities and a reduced positive effect from working capital[33] - Capital expenditures amounted to AR$ 4.4 billion in 3Q23, primarily for maintenance capex[33] - A dividend payment of AR$ 13.7 billion was made in July 2023[33] 2023 Outlook 2023 Outlook The company expects a slight adjustment in industry volumes but remains confident in achieving its goals amid election uncertainty - Industry volumes are expected to show a slight adjustment from record highs, following a lower level of economic activity[36] - Increased uncertainty due to the election period is affecting economic actors, yet cement volumes continue to demonstrate resilience[36] - The company is confident in achieving its goals by year-end, contributing to the development of the country from its leadership position[36] Financial Tables Adjusted EBITDA Reconciliation & Margin This table reconciles Net Profit (Loss) to Adjusted EBITDA for the three and nine-month periods ended September 30 Adjusted EBITDA Reconciliation & Margin (AR$ million) | Metric | 3-months ended Sep 30, 2023 | 3-months ended Sep 30, 2022 | % Chg. | 9-months ended Sep 30, 2023 | 9-months ended Sep 30, 2022 | % Chg. | | :------------------------------------ | :-------------------------- | :-------------------------- | :----- | :-------------------------- | :-------------------------- | :----- | | Net profit (Loss) | 7,501 | (29,168) | n/a | 19,485 | (11,469) | n/a | | (+) Depreciation and amortization | 5,833 | 7,233 | -19.3% | 16,631 | 20,665 | -19.5% | | (+) Income tax expense | 1,480 | 2,638 | -43.9% | 6,508 | 13,371 | -51.4% | | (+) Financial interest, net | 12,852 | 6,269 | 105.0% | 28,119 | 4,637 | 506.4% | | (+) Exchange rate differences, net | 16,538 | 2,110 | 683.8% | 28,743 | 8,966 | 220.6% | | (+) Other financial expenses, net | 1,181 | 36,805 | -96.8% | 3,753 | 38,439 | -90.2% | | (+) Gain on net monetary position | (28,991) | (8,785) | 230.0% | (54,914) | (15,497) | 254.4% | | Adjusted EBITDA | 17,189 | 17,890 | -3.9% | 50,671 | 61,296 | -17.3% | | Adjusted EBITDA Margin | 23.2% | 22.1% | +105 bps | 24.1% | 27.8% | -370 bps | Condensed Interim Consolidated Statements of Financial Position (Balance Sheet) The balance sheet details assets, shareholder's equity, and liabilities as of September 30, 2023, and December 31, 2022 Condensed Interim Consolidated Statements of Financial Position (AR$ million) | Item | As of Sep 30, 2023 | As of Dec 31, 2022 | | :-------------------------------- | :----------------- | :----------------- | | ASSETS | | | | Non-current assets | 326,522 | 330,334 | | Current assets | 94,210 | 81,846 | | TOTAL ASSETS | 420,732 | 412,180 | | SHAREHOLDER'S EQUITY | | | | Equity attributable to owners | N/A | N/A | | Non-controlling interests | N/A | N/A | | TOTAL SHAREHOLDER'S EQUITY | N/A | N/A | | LIABILITIES | | | | Non-current liabilities | N/A | N/A | | Current liabilities | N/A | N/A | | TOTAL LIABILITIES | N/A | N/A | | TOTAL SHAREHOLDER'S EQUITY AND LIABILITIES | N/A | N/A | - Total assets increased from AR$ 412,180 million at December 31, 2022, to AR$ 420,732 million at September 30, 2023[40] - Current assets saw an increase from AR$ 81,846 million to AR$ 94,210 million, primarily driven by an increase in cash and banks from AR$ 1,350 million to AR$ 11,757 million[40] Condensed Interim Consolidated Statements of Profit or Loss (Income Statement) The income statement presents revenue, gross profit, and net profit for the three and nine-month periods Condensed Interim Consolidated Statements of Profit or Loss (AR$ million) | Item | 3-months ended Sep 30, 2023 | 3-months ended Sep 30, 2022 | % Change | 9-months ended Sep 30, 2023 | 9-months ended Sep 30, 2022 | % Change | | :------------------------------------ | :-------------------------- | :-------------------------- | :------- | :-------------------------- | :-------------------------- | :------- | | Net revenue | 74,182 | 80,878 | -8.3% | 210,559 | 220,154 | -4.4% | | Cost of sales | (56,931) | (63,656) | -10.6% | (158,442) | (160,349) | -1.2% | | Gross Profit | 17,251 | 17,222 | 0.2% | 52,117 | 59,805 | -12.9% | | Selling and administrative expenses | (6,157) | (6,270) | -1.8% | (18,727) | (18,915) | -1.0% | | Gain on net monetary position | 28,991 | 8,785 | 230.0% | 54,914 | 15,497 | 254.4% | | Exchange rate differences | (16,538) | (2,110) | 683.8% | (28,743) | (8,966) | 220.6% | | Financial expenses | (14,564) | (43,326) | -66.4% | (35,489) | (45,999) | -22.8% | | Profit (loss) before taxes | 8,980 | (26,530) | n/a | 25,994 | 1,903 | 1266.2% | | Net Profit (Loss) | 7,501 | (29,168) | n/a | 19,485 | (11,469) | n/a | | Earnings per share (basic and diluted) | 12.6818 | (49.4299) | n/a | 33.6374 | (18.6130) | n/a | - Net Profit (Loss) for the period attributable to Owners of the Company was AR$ 7,398 million in 3Q23, a significant improvement from a loss of AR$ 28,936 million in 3Q22[41] Condensed Interim Consolidated Statement of Cash Flows The cash flow statement details cash from operating, investing, and financing activities for the reporting periods Condensed Interim Consolidated Statement of Cash Flows (AR$ million) | Item | 3-months ended Sep 30, 2023 | 3-months ended Sep 30, 2022 | 9-months ended Sep 30, 2023 | 9-months ended Sep 30, 2022 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net cash generated by operating activities | 14,613 | 27,265 | 38,383 | 40,857 | | Net cash (used in) investing activities | (4,311) | 1,845 | (11,431) | (3,521) | | Net cash generated by (used in) financing activities | (19,808) | (46,350) | (6,250) | (35,324) | | Net increase (decrease) in cash and cash equivalents | (9,506) | (17,240) | 20,702 | 2,012 | | Cash and cash equivalents at the end of the period | 20,909 | 8,257 | 20,909 | 8,257 | - Cash and cash equivalents at the end of the period significantly increased from AR$ 8,257 million in 3Q22 to AR$ 20,909 million in 3Q23[42] Investor Relations Contact Investor Relations Contact Information This section provides contact details for the company's Investor Relations team - Marcos I. Gradin serves as the Chief Financial Officer and Investor Relations contact[43] - Diego M. Jalón is the Head of Investor Relations[43] - Contact can be made via phone at +54 (11) 4319-3050 or email at investorrelations@lomanegra.com[43]