PART I Key Information This section presents selected financial data for 2018-2020, highlighting a 2020 revenue decrease but net profit increase, and details significant risks from Argentina's volatile macroeconomic environment. Selected Financial Data - The company's financial statements from 2018 to 2020 have been restated into constant currency to reflect the effects of hyperinflation in Argentina, in accordance with IAS 2937 Consolidated Statement of Profit or Loss (in millions of Ps.) | Indicator | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Revenues | 41,623.3 | 47,753.1 | 51,238.2 | | Gross profit | 12,596.9 | 13,046.9 | 12,844.7 | | Net profit from continuing operations | 6,253.5 | 4,485.0 | 3,341.4 | | Net profit from discontinued operations | 5,128.6 | 1,020.3 | 743.7 | | Net profit | 11,382.1 | 5,505.3 | 4,085.1 | | Earnings per share (continuing & discontinued) | 19.0445 | 8.7692 | 6.3243 | Consolidated Statement of Financial Position (in millions of Ps.) | Indicator | As of Dec 31, 2020 | As of Dec 31, 2019 | | :--- | :--- | :--- | | Total assets | 70,945.9 | 75,725.6 | | Total liabilities | 25,555.3 | 35,798.9 | | Total shareholders' equity | 45,390.6 | 39,926.7 | Risk Factors - The company's operations are heavily exposed to Argentina's macroeconomic conditions, including high inflation, currency devaluation, and political instability, which could adversely affect results444548 - Argentina's high inflation rates (36.1% in 2020, 53.8% in 2019) increase operating costs, particularly labor, and reduce consumer purchasing power, potentially impacting demand and financial results606168 - Significant devaluation of the Argentine peso against the U.S. dollar (40.5% in 2020, 59.0% in 2019) negatively impacts the ability to service foreign currency-denominated debt and can fuel inflation768081 - Government measures in response to the COVID-19 pandemic, such as mandatory quarantines and business restrictions, have negatively impacted production, supply chains, and demand for the company's products171173183 - The cyclical nature of the cement industry, which is sensitive to construction activity levels, exposes the company to potential decreases in revenue and profit margins during economic downturns195 - The company faces competition from other major cement producers in Argentina, such as Holcim and Avellaneda, who are also expanding their production capacity, which could intensify market competition196197 - The company's railway concession (Ferrosur Roca), which expires in 2023, is subject to renegotiation and potential termination by the Argentine government, which could materially impact logistics and business operations259260261 Information on the Company Loma Negra is Argentina's leading vertically-integrated cement company, holding a 43.8% market share in 2020, with nationwide operations and a major plant expansion nearing completion. History and Development of the Company - Founded in 1926, Loma Negra has grown through acquisitions and organic expansion, including the L'Amalí plant construction330332334 - In 2005, the company became part of the InterCement Group and completed its IPO on the NYSE and MERVAL in October 2017335338 - A major expansion of the L'Amalí plant, initiated in 2017 with an investment of approximately US$350 million, is underway to add 2.7 million tons of annual capacity339 - On August 21, 2020, the company sold its entire 51% stake in Yguazú Cementos (Paraguay) for US$107 million, using proceeds to repay debt and distribute an extraordinary dividend341 Business Overview - Loma Negra is the leading cement producer in Argentina with a 43.8% market share in terms of sales volume for the year ended December 31, 2020344 Installed Production Capacity (as of Dec 31, 2020) | Product | Annual Installed Capacity | | :--- | :--- | | Cement | 8.4 million tons | | Clinker | 5.2 million tons | | Concrete | 0.9 million m³ | | Aggregates | 2.2 million tons | | Lime | 0.5 million tons | - The company estimates its limestone reserves are sufficient for approximately 158 years of operation based on 2020 production levels345390 - Energy is a significant cost component, representing 26% of the total cost of sales in 2020, with the company utilizing a mix of thermal and electrical power, including increasing renewable sources404 - In 2020, 71% of total cement sales were made to wholesale distributors, 20% to concrete producers, and the remainder to industrial customers and construction companies424 - The company is the only cement producer in Argentina with nationwide coverage, with its main competitors being Holcim Argentina, Cementos Avellaneda, and PCR, who have strong regional market positions458461 Property, Plants and Equipment - As of December 31, 2020, the company owned eight cement manufacturing plants, eleven concrete plants, and one granitic aggregates plant in Argentina477 - The L'Amalí plant expansion project is expected to increase annual cement production capacity by 2.7 million tons with a total capital expenditure of approximately US$350 million504 - As of December 31, 2020, the L'Amalí expansion project was 96% complete, with approximately Ps. 22,490 million invested, and clinker production expected by May 2021 with full commissioning in the second half of the year504510 Operating and Financial Review and Prospects This section details the company's financial performance, heavily influenced by Argentina's macroeconomic conditions, showing a 2020 revenue decrease but a significant net profit increase driven by asset sales. Operating Results Year-over-Year Performance Comparison (in millions of Ps.) | Indicator | 2020 | 2019 | % Change | | :--- | :--- | :--- | :--- | | Revenues | 41,623.3 | 47,753.1 | -12.8% | | Gross Profit | 12,596.9 | 13,046.9 | -3.4% | | Net Profit from Continuing Operations | 6,253.5 | 4,485.0 | +39.4% | | Net Profit | 11,382.1 | 5,505.3 | +106.8% | - Revenues in 2020 decreased by 12.8% to Ps. 41.6 billion, primarily due to sales volume declines across all segments, with the concrete segment most affected (-62.5% volume) by the COVID-19 lockdown708711 - Cost of sales decreased 16.4% in 2020, more than the revenue decline, driven by lower volumes, reduced energy costs, and tighter cost controls in response to the pandemic712 - Net financial results improved from a loss of Ps. 2.1 billion in 2019 to a gain of Ps. 1.1 billion in 2020, mainly due to positive exchange rate differences and lower financial expenses720 - Net profit from discontinued operations was Ps. 5.1 billion in 2020, reflecting the gain from the sale of the company's stake in Yguazú Cementos S.A706707 Liquidity and Capital Resources Consolidated Cash Flows (in millions of Ps.) | Cash Flow Source | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Continuing Operating Activities | 11,387.6 | 9,326.2 | 7,007.3 | | Continuing Investing Activities | (1,429.5) | (15,972.9) | (8,679.0) | | Continuing Financing Activities | (10,503.3) | 3,498.0 | (4,284.1) | - Net cash from continuing operating activities increased to Ps. 11.4 billion in 2020 from Ps. 9.3 billion in 2019758759 - Net cash used in continuing investing activities decreased significantly to Ps. 1.4 billion in 2020 from Ps. 16.0 billion in 2019, mainly due to proceeds from the sale of Yguazú Cementos offsetting capital expenditures for the L'Amalí expansion761 - As of December 31, 2020, total outstanding borrowings were Ps. 6.4 billion, a significant reduction from Ps. 12.5 billion at year-end 2019, with 99.5% denominated in foreign currency (USD and EUR)773774 Contractual Obligations Contractual Obligations as of December 31, 2020 (in millions of Ps.) | Obligation | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Financial borrowings | 6,756.6 | 4,780.0 | 1,976.6 | — | — | | Accounts payable | 5,513.1 | 5,395.4 | 117.7 | — | — | | Taxes payable | 2,884.1 | 2,884.1 | — | — | — | | Lease liabilities | 730.3 | 148.5 | 192.5 | 179.7 | 209.6 | | Total | 17,628.9 | 14,784.3 | 2,427.0 | 207.0 | 210.5 | Directors, Senior Management and Employees This section details the company's Board of Directors and executive management, outlining compensation, board committees including an independent Audit Committee, and employee numbers. Directors and Senior Management - The Board of Directors consists of nine members, led by President Flávio Mendes Aidar and Vice-President & CEO Sergio Damián Faifman, with four independent directors799 Compensation - Aggregate cash compensation paid to senior management was Ps. 214 million in 2020, up from Ps. 190 million in 2019822 - The company had a long-term incentive program based on phantom stock rights, which was terminated in February 2021 and replaced by two new stock-based compensation plans831841 Board Practices - The company has an Audit Committee composed of three independent members, in compliance with CNV, SEC, and NYSE requirements862 - In 2019, the Board established three new committees: Results, Finance and Strategy; People and Governance; and Risk and Reputation870871872 Employees Employees by Business Segment | Business Segment | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Cement | 1,404 | 1,375 | 1,574 | | Concrete | 272 | 156 | 386 | | Aggregates | 44 | 61 | 73 | | Railroad | 1,151 | 1,221 | 1,232 | | Others | 29 | 31 | 32 | | Total | 2,900 | 2,844 | 3,297 | Major Shareholders and Related Party Transactions As of March 2021, Intercement Trading e Inversiones Argentina, S.L. was the controlling shareholder, and the company engages in ordinary course related party transactions. Major Shareholders Beneficial Ownership of Shares (as of March 19, 2021) | Name of Beneficial Owner | Percentage | | :--- | :--- | | Intercement Trading e Inversiones Argentina, S.L. | 51.04% | | The Capital Group Companies Inc. | 8.50% | | Redwood Capital Management, LLC. | 5.45% | Related Party Transactions - In August 2020, the company entered into a know-how transfer agreement with its indirect parent, Intercement Participações S.A., for a royalty fee of 1% of the company's revenues893 - The company has cost-plus service agreements with affiliates for consulting, training, and technical assistance related to the L'Amalí Line 2 expansion project894 Financial Information This section covers legal proceedings, including antitrust investigations and a class action lawsuit, and outlines the company's dividend policy. Consolidated Statements and Other Financial Information - As of December 31, 2020, the company was party to 459 legal proceedings with total claims of Ps. 965.5 million, for which it had provisioned Ps. 197.3 million for probable losses899900 - The company is subject to several ongoing market investigations by Argentina's antitrust commission (CNDC) regarding competitive conditions in the cement market904905907 - A putative class action lawsuit filed in New York State related to the 2017 IPO remains ongoing, while a similar federal class action was dismissed in the company's favor in 2020909910914 - The company's dividend policy requires allocating 5% of annual net earnings to a legal reserve until it reaches 20% of share capital, with distributions subject to shareholder approval and financial condition917919922 Additional Information This section details the company's corporate structure, Argentina's stringent exchange controls, and material Argentine and U.S. federal income tax considerations for shareholders. Exchange Controls - Argentina has reinstated rigid foreign exchange controls, requiring prior Central Bank authorization for many transactions, including portfolio investments, dividend payments, and foreign debt pre-payment970971 - Proceeds from the export of goods and services are subject to mandatory repatriation into Argentina and conversion into Pesos within specified timeframes971 - Access to the FX Market for payments requires an affidavit stating the entity has not sold foreign currency-settled securities within the preceding 90 days and will not do so in the following 90 days973 Taxation - Dividends paid to non-residents from income generated after January 1, 2018, are subject to a 7% income tax withholding in Argentina985 - Capital gains from the sale of shares by non-residents are generally exempt from Argentine income tax if publicly offered and traded on authorized stock markets, which applies to the company's shares and ADSs991992 - For U.S. Holders, dividends are generally treated as foreign-source income, and those paid on NYSE-listed ADSs may be considered "qualified dividends" subject to reduced tax rates, assuming the company is not a PFIC10211022 Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from interest rate and foreign currency fluctuations, with most borrowings at floating rates and significant foreign currency debt, leading to peso devaluation exposure. - The company is exposed to interest rate risk, with 82.3% of its Ps. 6.46 billion in total borrowings at floating rates as of December 31, 20201041 - Significant foreign currency risk exists as 99.5% of borrowings were denominated in foreign currencies (82% in USD, 18% in EUR) as of year-end 20201045 - A hypothetical 25% depreciation of the peso against the U.S. dollar would have increased the company's foreign currency-denominated indebtedness by approximately Ps. 1.7 billion as of December 31, 20201046 - The company reported a negative working capital balance of Ps. 1.2 billion as of December 31, 2020, which it considers manageable due to predictable cash flows from its principal activities1048 Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2020. - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 20201065 - Management assessed the company's internal control over financial reporting based on the COSO 2013 framework and concluded it was effective as of December 31, 20201069 Principal Accountant Fees and Services The company's independent registered public accounting firm, Ernst & Young Global, billed Ps. 87.2 million in 2020 and Ps. 66.3 million in 2019, primarily for audit services, with all fees pre-approved. Accountant Fees (in thousands of Ps.) | Fee Type | 2020 | 2019 | | :--- | :--- | :--- | | Audit fees | 83,683.3 | 65,376.9 | | Audit related fees | 2,855.0 | 360.0 | | Tax fees | 644.9 | 594.5 | | Total | 87,183.2 | 66,331.4 | Purchases of Equity Securities by the Issuer and Affiliated Purchasers On February 12, 2021, the Board approved a share repurchase plan for up to Ps. 750 million or 10% of capital stock, effective for 90 days, with no repurchases in 2020. - A share repurchase plan was approved on February 12, 2021, authorizing the company to buy back up to Ps. 750 million of its shares over a 90-day period10781080 Corporate Governance As a "foreign private issuer" and "controlled company," Loma Negra follows Argentine corporate governance practices, differing from some NYSE requirements, but maintains an Audit Committee compliant with independence rules. - The company leverages its status as a "foreign private issuer" and "controlled company" to follow home country (Argentine) corporate governance practices, which differ from NYSE standards for domestic US companies1083 - Key differences from NYSE rules include not requiring a majority-independent board and not mandating compensation or nominating committees composed entirely of independent directors10851086 PART III Financial Statements This section contains the audited consolidated financial statements for 2018-2020, prepared under IFRS and restated for hyperinflation, reflecting the Yguazú Cementos sale and COVID-19 impact. - The financial statements were prepared in accordance with IFRS and restated into constant currency to reflect Argentina's hyperinflationary environment as required by IAS 2911371138 - The sale of the company's 51% interest in Yguazú Cementos S.A. on August 21, 2020, is accounted for as a discontinued operation under IFRS 5, with its results presented separately11401485 - The COVID-19 pandemic and related government measures, such as mandatory isolation, led to temporary suspensions of production and construction projects, impacting the company's operations and financial performance in 202014971499 - An impairment loss of Ps. 947 million was recognized in 2020 on property, plant, and equipment, primarily related to the rail services (Ps. 784 million) and aggregates (Ps. 163 million) cash-generating units due to decreased demand135213561357
Loma Negra pania Industrial Argentina Sociedad Anonima(LOMA) - 2020 Q4 - Annual Report