Loma Negra Reports 3Q19 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-month and nine-month period ended September 30, 2019 (our “3Q19”).

3Q19 Key Highlights

• Net revenue decreased 7.6% YoY to Ps.9,178 million (US$172 million)
• Consolidated Adjusted EBITDA up 2.7% YoY to Ps.2,645 million (US$52 million), principally driven by the Cement and Railroad segment, and partially offset by non-recurrent production-footprint adequacy costs of approximately Ps.61 million (US$1.2 million).
• Excluding this non-recurrent charge, Adjusted EBITDA would have been Ps.2,707 million (US$53 million)
• Consolidated Adjusted EBITDA margin expanded by 289 basis points YoY from 25.9% to 28.8%, excluding non-recurrent production-footprint adequacy costs, Consolidated Adjusted EBITDA would have been 29.5%, expanding 356 basis points
• Net Debt/LTM Adjusted EBITDA ratio of 0.87x from 0.43x in FY18

The Company is reporting results of its subsidiaries by applying International Accounting Standards 29 – IAS 29 (Financial Reporting in Hyperinflationary Economies) (“IAS 29”), and certain financial figures¹ Table 1b and Table 11 below were prepared in U.S. dollars and Pesos without giving effect to IAS 29.

Commenting on the financial and operating performance for the third quarter of 2019, Sergio Faifman, Loma Negra’s Chief Executive Officer, noted: ”The unexpected result in the August primary elections lead to a high financial and economic volatility that eroded the incipient recovery previously observed in some of the macroeconomic variables.

In this context, Cement demand was softer than expected, thus we remained focused on executing cost-control initiatives oriented towards optimizing our production footprint, as our project in L´Amalí continues as scheduled to kick in 2Q20.

Given this situation, our business kept delivering both Adjusted EBITDA margin expansion and Adjusted EBITDA growth.

Looking ahead, an important factor will be the policies adopted by the new administration in order to reestablish financial stability and economic growth.”

1. Table 1b and Table 11—Figures in US dollars result from the calculation of figures expressed in Argentine pesos and the average exchange rate for each reporting period (2019 figures exclude the impact of IAS 29 and 2018 figures are as previously reported)

Overview of Operations

Sales Volumes

Sales volumes of cement, masonry and lime in Argentina during 3Q19 declined by 7.5% YoY to 1.49 million tons, as demand was affected amid of a higher macroeconomic volatility. In contrast with previous quarters, the bag segment experienced a softer decline than the bulk segment.

In Paraguay, sales volumes decreased by 1.1% YoY in the third quarter to 0.15 million tons, mostly underpinned by the private sector and affected by a slower than expected public works execution. As a result, consolidated total sales volumes of cement, masonry and lime for the quarter decreased 7.0% YoY to 1.64 million tons.

Sales volumes in the Concrete segment in Argentina were down almost 34% YoY to 0.19 million m3, as the major infrastructure public works and private projects slowed down or put on hold.

Despite the strong increase in the volume of transported frac-sand, the volumes of the railway segment decrease around 8% compared to the same quarter in 2018, affected by a lower volume transported in most of the other segments. By contrast, Aggregate volumes in 3Q19 increased by almost 5% YoY to 0.26 million tons.

Review of Financial Results

Net Revenues

Net revenue decreased 7.6% to Ps. 9,178 million in 3Q19, from Ps. 9,931 million in the comparable quarter last year, mostly due to the impact of lower revenues in Concrete and Cement, masonry and lime in Argentina.

Revenues in Cement, masonry and lime in Argentina were down 4.0% YoY, mainly as a result of the volume drop, partially offset by higher prices. Cement revenues in Paraguay decreased by 1.7% YoY, mostly as a consequence of the lower volume sold.

Concrete segment presented a decline in both sales volumes and prices when compared to the strong third quarter last year, resulting in revenues dropping 37.7% YoY. Railroad revenues decreased 9.4% YoY, as price decreased in real term and sales volume declined 7.9%. By contrast, Aggregate revenues were up 2.0% YoY during the period, driven by improving sales volume.

Cost of sales, and Gross profit

Cost of sales declined 12.0% YoY reaching Ps. 6,740 million in 3Q19 mainly reflecting a lower volume of sales and the production-footprint adequacy efforts achieved in the second quarter this year.

In the search to further improve our production-footprint, during the quarter, San Juan facility was reconverted to a grinding and distribution center, incurring in approximately Ps. 61 million of non-recurrent costs.

Gross profit increased 7.3% YoY to Ps. 2,439 million in 3Q19 from Ps. 2,273 million in 3Q18, with gross profit margin expanding 368 basis points YoY to 26.6%. If non-recurrent costs associated to the production-footprint adequacy are excluded, gross profit margin would have expanded by 435 basis points to 27.2%.

Selling and Administrative Expenses

Selling and administrative expenses (SG&A) in 3Q19 decreased 10.5% YoY to Ps. 605 million, from Ps. 676 million in 3Q18. As a percentage of revenues, SG&A decreased 22 basis points to 6.6% in 3Q19, from 6.8% in 3Q18 positively impacted by structure adequacy measures adopted earlier this year in addition to a further reduction in the effective sales tax rate.

Adjusted EBITDA & Margin

Adjusted EBITDA increased 2.7% YoY in the third quarter of 2019 to Ps. 2,645 million, with Adjusted EBITDA margin expanding 289 basis points to 28.8% compared to 25.9% in 3Q18.

Excluding the application of IAS 29, as shown on Tables 1b, Adjusted EBITDA increased 54.0% YoY in the third quarter of 2019, reaching Ps. 2,615 million, mainly driven by the Cement and Railroad segments, with Adjusted EBITDA margin expanding 229 basis points to 30.0% compared to 27.7% in 3Q18. Excluding non-recurrent costs from production-footprint adequacy, Adjusted EBITDA would have reached Ps. 2,677 million, with an EBITDA margin of 30.7%.

Table 11, presenting financial Data by Segment (Excluding IAS 29), shows that Adjusted EBITDA for the Cement segment in Argentina increased during the third quarter 51.9% YoY and the margin expanded by 90 basis points to 30.9%. The Cement segment in Paraguay, reported a 56.9% YoY increase in Adjusted EBITDA while Adjusted EBITDA margin was 45.1%, expanding 156 basis points compared to the same period one year ago.

In addition, the Concrete segment reported an increase in Adjusted EBITDA reaching Ps. 47.8 million, with the margin expansion of 73 basis points, from 4.1% to 4.8%, mainly as a result of a cost structure adequacy. Moreover, Railroad segment improved almost Ps. 52.3 million in the third quarter of 2019, and the Adjusted EBITDA margin expanded to 14.5% from 11.0% in the comparable period in 2018, as a result of cost adequacy efforts. Aggregates Adjusted EBITDA margin for the 3Q19 recover to 4.1% mostly explained by higher costs dilution.

Finance Costs-Net

During 3Q19, the company reported a loss of Ps. 1,567 million in total finance costs-net compared to a loss of Ps. 1,440 million in the previous year third quarter, mainly due to a higher loss in foreign exchange differences as a result of the exchange rate depreciation during the quarter, partly compensated by a higher gain on net monetary position.

Net Profit and Net Profit Attributable to Owners of the Company

Net Profit for 3Q19, recovered to Ps. 60 million from a loss of Ps.144 million in the corresponding quarter of the previous year.

Net Profit Attributable to Owners of the Company improved 232 million, to Ps. 50 million in 3Q19. During the quarter, the Company reported earnings per common share of Ps. 0.0836 and earnings per ADR of Ps. 0.4179, compared with a loss per common share of Ps. 0.3060 and a loss per ADR of Ps. 1.5299 in 3Q18.

Capitalization

As of September 30, 2019, total cash and cash equivalents were Ps. 1,353 million compared with Ps. 4,238 million as of the December 31, 2018 mainly due to increased capex investments. Total debt at the close of the quarter stood at Ps. 10,415 million, composed by Ps.4,991 million in short-term borrowings, including the current portion of long-term borrowings (or 48% of total borrowings), and Ps.5,424 million in long-term borrowings (or 52% of total borrowings).

As of September 30, 2019, 42% (or Ps.4,351 million) Loma Negra’s total debt was denominated in U.S. dollars, 28% (or Ps. 2,873 million) in Guaraníes, 26% (or Ps.2,682 million) in Argentine pesos, and 5% (or Ps.509 million) in Euros. The average duration of Loma Negra’s total debt was 1.4 years.

As of September 30, 2019, Ps.6,421 million, or 62%, of the Company’s total consolidated borrowings bore interest at floating rates, including Ps.3,738 million of foreign currency-denominated borrowings that bore interest at rates based on Libor, and Ps.2,682 million of borrowings with other floating interest rate.

The Net Debt to Adjusted EBITDA (LTM) ratio increased to 0.87x as of September 30, 2019 from 0.43x as of December 31, 2018 reflecting the use of funds in investing activities.

Cash Flows

In the 3Q19, cash flow generated by operating activities was Ps.3,577 million compared to Ps.3,026 million in 3Q18, explained mainly by a higher profitability during the period and lower working capital needs. During 3Q19, the Company made capital expenditures for a total of Ps.3,134 million, mostly allocated to the expansion of production capacity of L’Amalí plant.

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, originally estimated at approximately US$350 million. Start-up date is projected for the second quarter of next year.

The Company continued with the overall project execution during the quarter. Main equipment and materials were already manufactured in China and Europe and almost fully delivered to site. In addition, the supply of local steel structures is in progress, and deliveries are in line with installation requirements. Electromechanical of kiln erection is completed, final welding is in progress, and works of preassembly and erection are progressing. Civil works for main foundations, silos and buildings structures are close to be finished. Additions to Property, Plant and Equipment related to this project during 3Q19 amounted to approximately Ps.2,336 million.

3Q19 Earnings Conference Call

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.

Rounding: We have made rounding adjustments to reach some of the figures included in this annual report. As a result, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.

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.

Contacts

IR Contacts
Marcos I. Gradin, Chief Financial Officer and Investor Relations

Gastón Pinnel, Investor Relations Manager

+54-11-4319-3050

[email protected]

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