Q2 2020 Loma Negra Compania Industrial Argentina SA Earnings Call

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Good morning, and welcome to eliminate <unk> second quarter 2020 earnings Conference call.

All participants will be in listen only mode.

This is the signal copper, especially.

Turkey.

After today's presentation, there will be an opportunity to ask question Oh segment. They start here right now we'll be spending in Spanish immediately following in English translation.

The question liquor stores and one in your telephone keypad to enjoy your question. Please press Star then too. Please note. This event is being recorded and I would now like to turn the conference over to Mr. Costantino IR manager. Please go ahead.

Thank you good morning, welcome towards second quarter, 2020, <unk> earnings release Conference call.

All we hope you and your Prime Minister say from wells.

By now everyone should have access to <unk> earnings press release, and the person vision for today's call well, we were distributed yesterday after market close.

Joining me on the call. This morning would be circle pipe on our CEO, One Vice President of war that Rick first our CFO Michael heavy.

Most of them will be available for the <unk> session.

Before we proceed I would like to make the following the Safe Harbor State today's call will contain forward looking statements I refer you to forward looking statements section of our earnings release, a recent finding we'd be <unk>.

We assume no obligation to update or revise any forward looking statements to reflect your change events or circumstances.

This conference calls, we also incurred discussion nongaap financial measures.

The full reconciliation to the corresponding furniture and mattress.

Included in the earnings press release.

No I would like to turn the call over to execute.

Thank you let them Hello, everyone. Thank goodness for an extra day.

Yes, I hope, you'll you'll find many outside somewhat.

I will let you mentioned if you play that will take what the I'm Dan Michael What do you saw what might cut the view Athena telesat after that I would delay some play not that much I'm, Dan would open the call killer whale tail.

I think consequences will be 19, but then went out of the second quarter that I mean, an implicit international flights look, though which is really heavily when I wouldn't be space I don't quote that I'm, depending on how they have you taken she'd glacial developing each when you dig show some of these peak show less self net.

Well the event lifted.

Let the patients to the take optical beep 18 with to put up I'm sure. We the special focus on put that team I want to community and letting our financial condition.

The adult Dick you'll see the political you know little bit Asia.

With a mind deletion, you know what cost management, securing working capital needs 18, pigs culture, but I thought that formulating our capital expenditures diabetes and extending show them maturities.

Well you better lit that's sort of use our net debt I wasn't net debt to EBITDA was that due to one point 17 titles.

So one country and they will continue developing called didn't they didn't pandemics economic activity remains weeks.

And then maybe deal you put that $32 million, we take on the actual well, 24.6% in the quota compared to the Sims quote, though less IATA heavily but in a pretty article that he seems to them.

Relative to this amended mine after the Michelle Fleming of say in IP that doesn't know more and got he's made the improvement of suddenly in May June and July in the bugs Hemant.

Regarding the Lumley expansion brittle shame on us we put it used to you can do you see Beatty work on site level issue on late April after the tempting to think show you. The Colby 19, let me Steve.

Thank you all together, we did you safety protocols adult how delighted that relation date of depression, which is now expected to be at the beginning of 2021.

Once again I wouldn't you say all our people in Argentina <unk>.

Right and so that'd be I show, a great stability to keep this be misleading.

As we know that can have the goal to Michael would have been who will walk you through I wouldn't month cut the view on peanut sales aside.

<unk> Medical go ahead.

Thank you start to feel good day everyone.

I also called you let me let me note was our safe and well.

She does she on slide 14, as opposed to construction sector of the 70 industry in Argentina suffered a civil construction, we barely a high degree of I mean does that go with 19 don't declared by the end of March which is currently different spacious according to each other section.

That's right, we observe a those from Reebok into Bucks second as.

Besides being closer to do so pricing it provides right our suspicious that households in my sort of construction, what's going to hear more about it on driver this use scenario.

There are a bundle say segment was up seven gross Argentina, though so we thought it was.

In June the Buck segment posted double digit increases.

Year over year they.

By contrast, during this quarter, but segment suffered the most.

But I thought it infrastructure works together with a restriction on brother construction killed so.

So I reserve the country, including the C. Diff, what decided on the great that wouldn't say this area.

That's really the show seven sold you Buck increased by almost 15%.

Percentage points from 56 or seven in second quarter to most of my team to more than 70%.

We expect this trend to continue to follow the mouse.

Good luck with eventually start to catch up last night on center space was fiction.

Larger brothers a structural works.

Public works to start to gain some momentum again.

Actually they should have all GDP growth, what you're closer to 20 revolve around a double digit declines. However, we are cautious or we are.

Attentive to the let up a lot of that but let me get in the country. A true then before mentioned upsides risk.

Turning to slide five for our review of our topline performance by segment.

Consolidated revenues were down 30.1% might be affected by the voters from construction of economic activity you know good.

Seven cents bargain slug country, 4.5% year on year.

Revenues fell by 25.8% as mentioned before but segments resolved as previously she's made a chilling very good levels on June.

Oh.

But I like the situation is more favorable not only because deal economic momentum of the country pretty pandemic.

But also because I love down was more flexible or to gather the volumes during the.

Quarter improved by 3.3 or four cents.

Boasted a record of tied to enjoy.

Revenues from our regular segment decreased 46.1% and deal and you know closely related to that so it's just bought that building material or something like so.

But certainly compensated by a service.

Right and you said concrete and aggregates.

In Argentina, where the most impacted by the hard to buy when it comes out of the projects.

On the team, 93% I'm into 4%, respectively moving onto slide six consolidated gross profit for the quarter declined by 32 point.

2% year on year heavier burden on DNA.

But as gross margin, which constructed by 151 basis points, reaching 24.1.

Or sense in the quarter, our core cement operations in Argentina contributed positively as we benefit from favor even put call I'd like to fixed cost structure, reflecting footprint I appreciate it.

Just last year.

And CNN expenses as a percentage of revenues increased by 209 basis points to 8.6%.

On six four or 5% handling, but by the sharp decline in revenues.

Let's turn to slide seven our adjusted EBITDA was down 34.6% in the quarter, which is $32 million, yet consolidated EBITDA margin expenses by 204 basis points to 27.9%.

Thanks to margin expansion in our Argentina, but I like.

Seven segment.

When excludes application installation accounting adjusted EBITDA margins in our seven masonry OLED segment in Argentina expanded by 155 basis points to 30.7% of with benefits by a significant reduction in energy input cost and also by the footprint that I push cfos achieved.

Last year most of my wife posted an adjusted EBITDA margin improvement of 100 on four basis point.

240% to 42.4%.

Adjusted EBITDA margins it to make it to 6.9% from 12.8%.

With that I wouldn't read both to the negative 83% and they go to you what kind of 73% respectively does too late to segments, where much of a severely affected by the restriction such acute construction work in major or burn centers.

EBITDA U.S. dollars, but don't stood at $56 crushing around 3% compared with the same period last year I see it was affected mainly by developing both logins.

Well, we've gone to the bottom line, a slight days netting down for the quarter decreased by almost 93% dealing yeah, reaching 111 million ambitious.

Southern mainly from an adjusted to begin construction.

No negative impact to California exchange loss.

Auto finance results as a percent others of 1.1 billion bushels compared to a gain of 677 million pesos in the segment more than in previous years.

Most explained by the foreign exchange loss of 560 million basis compared to a gain of 414 million pesos in second quarter to Boston.

Hi, there just wait and love them to minimum stay home grossed up to something and then financial expense.

Oh six other 15 million pesos. So did media this is higher than the previous quarter.

And that passive monetary position resulted in a gain of 431 million business.

I should in U.S dollars, our net income decreased 59.

Well, it's 1% to $10 million in the quarter from $2 million to $5 million in the Oh we're.

Moving onto the balance sheet as you can see on slide nine during the second quarter, we remain diligent on that in our cash management, securing working capital needs.

I didnt fixed cost structures, reformulating old capital expenditure priorities and extending shorter maturity.

Well together like has reduced our net debt by $26 million to 200 million.

I know what net debt to EBITDA ratio to 1.7 D. Dimer from one point 56 times in the first quarter this year.

Ross test by commercial breaks down like these.

Jay for 1700 ambitious 37% <unk> currency.

Jim, but something what I'm here.

Our capital expenditure plant continues with investment for the imports are reaching 1 billion pesos, well approximately $15 million almost entirely dedicated to this bunch approach.

The current situation continues to be conditions by the goal is 19 restrictions will remain particularly in terms of our liquidity and our liability management.

During this quarter, we felt rollover shorter maturities, we continue searching for opportunities.

We allow us to further improve our capital structure.

Now for final remarks, I would like to hands on the call love to Subcu.

Thanks, a lot of course.

To wrap up the presentation I. Please ask you to downlink satellite then.

Hello, and 70 of voluntary I'd always update you already.

Yes, he seats, our commitment we thought when communities, our supply Ya and customer and of course our shareholder.

I would weakness suffer a heavy told back in I.

I would say plumbing in all segments. However, we are no more encouraged by the strong recovery upside in May June actual light in the bugs aiming.

At some point in time, I'd say I mean should also awake, particularly in the when I say this metropolitan area, where <unk> that it takes you out of being more CBD.

From the macroeconomic perspective, having the government to reach an agreement when both hold that it's a dip in that like detection in this context, we understand that the construction sector, you're going to be a key sector into so much needed economics tomorrow.

Still that a company, but you conceptually I'm glad that challenging therefore, we remain calculus about providing a guideline for 2020 into the grow.

Then off by 18, we've cut that assume works only Lombardi expansion project, which is now back on track.

Not really the temporary suspension to get that we debut sets the political adult have delayed deep they know what age from that of the project.

Which is now expected to be at the beginning of 2020, what we're reminded that uncultured regarding the evolution of the worldwide crises, which ending teams hard to predict a good finally like two cents I want people, who in this unprecedented kobin they didn't situation show a great weapons.

Really tea and the sole thing that you know then to overcome difficulties and to keep on grinding the weakness.

This is there of our prepared remarks, we're now ready to take questions. Operator, Please open the call for questions.

We will now begin the question and answer session.

Ask a question Chris stores and one in their Touchtone phone.

If you're using a speakerphone please pick up your handset wrecking the Keith.

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Also please note that that's your Sir your bike when we'll be responding in Spanish immediately following in English translation.

At this time, we a pause momentarily to assemble roster.

My first question today will come from Eric nickel or with Bank of America. Good.

Yes, hi, good morning. Thank you for your time, so just a quick question from Mike.

Speaking about actually meant that the increase in demand scene.

Well the corridor.

I'd like to know how much of which is from an actual increasingly man and how much do you think will come from though there will be early oh bulk cement and how sustainable incremental demand would be for the remainder of.

Thank you very much.

Morning, Eric Singapore breakdown.

And.

Shimon.

Well Luminaires, a 10 for the men detection load Shaw enlist will diminish it she got really good I know I said on being able to see I'm talking about Kyle.

If you take a look to the man.

The strong driver all of a demand during the quarter want get back segment.

We are represented approximately 20%.

It will see it up but she commented portal daunting, but I'm just wondering if that's your middle body diner dash.

That's true India Dwight ER Docs, all would ask Ian that intermodal by east So nobody Randy I mean income, which I think she on is quite a while I'm DNA Lindy automated bite and we epic always him into what on it.

So what is behind this.

D. situation is that.

There are two points. The first one is that incremental metropolitan area.

Basically waterside is ctr surrounding region at very solid restriction to operate.

In private construction and the other thing is a this is also a vacation in the rest of the country in some parts of the Republican.

She tsunami that no matter what appeal, the the who we know the Julio Meanwhile, in North Korea.

In cement them with solid Satagaj gazebos, yet or are you are they do they need momentum Daniel bustelo, either get I need it got a lot of the she went to us in double digit DAPL Daniel.

So taking a look to some numbers and June and July.

Are they backed segment is approximately 50% I Bob.

Your your I go on a month.

I'm bulk is approximately 50% below.

At June and July figure, so last year, it's a more broadly going in London me into it looks you on it he Canadian each year the deal with not only Gasquet kilo young Mcdonald she I'll leave it I nailing thing what I mean, what are the procurement.

So its a.

Why probable that are considering the.

Huh.

At least in their restrictions to operate together with ER with their upcoming public works.

We expect.

And Dan box shipment should also increase despite its.

Thank you.

And once again, if you like to ask a question. Please press Star then one.

Our next question will come from Anthony.

No it's something there. Please go ahead.

Hi, well.

Sure.

Thanks.

Taking my question.

I was wondering if you can come at it.

Pricing dynamic that you have seen so far and also what you expect funny coming <unk>.

See I mean that analyst <unk> accepting and.

Yes, and innovation inflation rate.

No. So if you see any lease cost price controls.

Even in Europe.

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In the past.

They are in east call them and thank you.

Hi analysis. Thank you for your question.

Hey, it but make no how do you have it got out of it they'll dramatic yeah. One on may not on main until they feel they still baby 30 day, you didn't give any update my name data. They lack contents you on the cost of the electric C.D. I company and money I look autos I see gig might have kind of heavy that you maybe double the dialogue and all that is.

Yeah, and it's got more awareness.

Sure first I would like to stand out that besides the.

Good good price greases during the quarter that words or no.

What we.

For cheap.

Good day important a painter stand out is that I work or cost control together with.

<unk> fixed cost structure restructuring that we did last year and enable us to keep a certain level.

Under control of our ABT eight per ton.

Let me Guy, but it's your they took all the data not enough when not <unk> do you actually I mean, the initially they look down in Phoenix modestly PCB Howdy elaborate on one of them. We lend that get will go we like do you eat out and it made it much.

So the price dynamic during the quarter was not a huge wrote a especially due to the and they look down.

And this low a recovery path.

Yeah.

At the beginning of the they looked out.

And Charlie let me say, who when Youre Julio dish I lied I mean I appreciate your would real Oh unless your question on my E. <unk> directly line, you don't but again that I mean, more baby and they'll get kilo mentally there, but if you will see the motor Sanyo, sending you up on the beginning of adequately plus you only or does she on.

But I'm a little bit them.

Or ready for June and July.

The pricing dynamic.

Came back to normal.

We expect for the rest of the year to be in line with inflation on other parameters that we take into account.

And once again, if you'd like to ask your question. Please press Star then one.

And at this time I'd like to turn the conference back over to got Santino for any closing remarks.

Thank you for during yesterday, we appreciate your participation on your interesting you know were company and we look forward to meeting. Moreover, you over the coming month, and providing financial and business updates next quarter. You got meantime, good team remains available to answer any quick.

I shouldn't that you might have.

Thanks, again and stay safe.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

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