Q3 2020 Loma Negra Compania Industrial Argentina SA Earnings Call
Good morning, and welcome to the Lemon that group third quarter 2020 conference call and webcast.
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After todays presentation, there will be an opportunity to ask questions.
Oh, sorry, Mr. Sergio pipeline.
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Please note that this event is being recorded I would now like to turn the conference.
Over to Mr. Gustavo to now.
Head of IR.
Hey, Scott Scott go ahead.
Thank you good morning, and welcome to <unk> third quarter 2020, <unk> earnings release Conference call.
Oh, we hope you and your family starts safe and well.
By now everyone should have access to our earnings press release and the person vision for today's call.
Both of which were distributed yesterday after market close.
Joining me on the call. This morning wouldn't be certified our C. O M Vice President of the board of directors and our CFO, Michael how are you.
Both of them will be available for the <unk> session.
Before we proceed I would like to make the what do with Safe Harbor statement todays call will contain forward looking statements I refer you to the forward looking statement section of our earnings release and recent filings with the FCC.
We assume no obligation to update or revise any forward looking statements to reflect new York changed events or circumstances.
This conference call.
We've also include discussion of non-GAAP financial measures would.
Reconciliation to the corresponding financial measures is included in the earnings press release.
Now I would like to turn the call over to Seth.
Yeah, sorry go ahead.
Thank you.
Hello, the one I think unfortunately not to date.
I hope you.
Felipe said somewhat yeah.
Yeah, I'm going to mention a few highlights the headquarter I'm then Michael when do you or what might come to view on peanuts outside.
After that I will provide some final tomorrow and then we'll open the call to a question.
I'd like to begin by thinking or what people I stay close than we thought.
He said so he's a thought would have been maybe difficult to quality. During these listen thank you.
You didn't have quote that we achieved many important to side with the V.D.A., both Medina button that.
Recall that he pathway that mindy, but what I can see that we experienced very strong sequential growth Nobody's Rachel I'll stick on.
On albeit as well you increase or almost 3% in yet on the other basis.
Outside of the <unk> now they somebody can be slip on what's the sentiment that I even made the basis you can check them out on the company did the light lots you private and public works execute young, but if indeed, the bike segment to start the call bidding.
So pardon me our company and I could have got to be.
Oh, what assessment, maybe be a bit about $48 million with an expansion of 9.1% in the quarter compared to the same quarter last year, that's with a mining conditions on our operation.
Maybe to recall that saves body, while improving or what have you de machine by four.
Comedy 54 basis point to 31.5%.
Additionally, during the quote that we decided to take the.
The sale of <unk>, and a 51% stake in it but I wasn't company he was with him in.
This was an excellent deal done, we'll let you Saturday Sean that we.
We then bleed more deep of approximately 19 last 12 months EBITDA.
I work on the on the water continues to the button the covidien they deem pandemic economic activity at the main weeks and then set the height yet.
Don't let's dig deep on motorcycles on a pay nationwide. We just take the two being a decent I'd like to the economy a simple.
I think a key element of our long done like this you know my the expansion project.
<unk> on track, it's pick the need to be integrated by maybe being.
2021.
I, you know kind of the coal to my point of view.
I will walk you through our money because if you do not see on the site.
Medical School.
Thank you so I feel good day, everyone. As you can see on slide five we are living beside the bottom that most of the second quarter well the GDP recorded a fast growth of 19%.
Viciously the construction sector continues to sequential recovery studies in mice.
But you called out the seven sector is experiencing a more vigorous rebel.
After <unk> de mob music like September was the first month in the quarter in a positive 10.5% growth there.
The main drivers beside just that it's back seven so which is explained by searching self construction a recent demand.
This segment grew around the 2% in the first quarter relative to the same quarter in 2018 I know so.
So both in September a historic record assuming that trend was also observed in October there's about 12.8% the old Hasbro for the industry.
By contrast, you in this quarter, but segment together with companies that have a good continues to suffer the most.
But by the court.
Professor works as it got friendship to operate.
Combined with economic uncertainty.
So, but you need the chefs admin sodium but increased by almost 14%.
Boys from 58, but setting third quarter, two bustling D to more than 72% in third quarter 2020.
We expect this breaks down to remain rather stay live in the following manner and.
That study, but am I would catch up that's more sixtyl, South east Oh, not just private above it looks oh.
Going to gain some momentum.
Definitely the economy I saw 40, she had bought from Telefnica, Rob Argentina still faces different death, but to study and they look at economic outlook, but.
But they sure though GDP ROFO two posted KRW 90 revolved around a double digit decline in this sense, we watch carefully the beagle of different economic sector. They are reopening focused.
Turning to slide five for a review of our topline performance by segment.
What consolidated revenues dropped 4.5% rather use of our core business and then may sorry, I lied sub type of 3% lets say volumes, increasing by 2.9% year on year unfavorable.
Pricing environment I.
As mentioned before.
Buck seven continues to be the driver behind this because the city revolved growing disquiet alone could be pre percent compare to the same quarter last year.
Revenues from our <unk> segment.
If we could do 9.8% year on year with volume dropped eight or 5.8% partially impacted by the change in product mix named.
They really are dropping just bought that business.
Building materials, some frac sand, partially compensated by other services roster.
Rather than yourself, but we can ever they are still the most to come but by the healthy body kind of private project funding.
I think the bottom 2%.
25.2% respectively.
Moving on to slide six consolidated gross profit for the quarter increased by 3.9% year on year margin expanded by 255 basis points.
Blame by our core business.
Particularly the recovery up revenues they'd like segment, we would gossip a four month, especially now that energy book I like a fixed cost structure, which reflects.
Put pretty tight with the airports achieved last year.
Energy inputs benefit from earlier braces renegotiations do better with improvements in unitary energy consumption.
<unk> expenses as a percentage of revenues increased by 67 basis points to 7.7% from.
7% may lead you to pay up a centre back seven cents.
Please turn to slide 10 of our adjusted EBITDA was up 11.6% in this quarter.
Reaching $48 million of consolidated EBITDA margin expanded by 454 basis points to 41.5%.
So margin expansion in our core business segment.
Gentlemen, nice 47th unlike.
Adjusted EBITDA margin decided when expanded by 172 basis points to 44.3.
Four cents I spoke about his recovery coupled with significant reduction in energy input costs, a good pricing, but pharma I was still performed previously reported.
<unk> adjusted EBITDA margin worsen to 6.3% from 14% in Buckhead like lower volume on cost declined less than proportionate.
Concrete and aggregates, both today and they got the 58 million pesos, a negative 42 million pesos effectively they remain severely affected by the limited toxic fusion of larger bothered about it works every.
Heavy D.A. in U.S. dollar per dollar stood at 32 interesting I run.
16% the bell is that shouldn't be as last year I love to do one person yeah sequential basis versus second quarter of this year.
Moving on to the bottom line on slide 890, guffaws afford us do that.
6.4 billion pesos or what how the 13 million U.S. dollar.
This figure includes.
4.2 billion pesos of income from discontinued operations here, but I want to eat.
Income from continuing operations were 2.2 billion pesos comparing to a loss of 180 million pesos.
Mostly explained by a positive impact of exchange rate difference.
The adjusted EBITDA expansion.
Partially upset by environmental losses in other segments.
As a consequence of the changing business perspective, we're just as a non cash impairment loss.
Approximately 851 media based.
They still struggle with the bigger stake is impairment on right away that the mounted.
<unk> hundred five.
Five medium vessels.
The remaining but I'd really.
Finally, net income was also affected by.
By a charge off 360 for the medium business related to the cash contribution down in Florida. So.
They actually student debt.
I'm not sure in U.S. dollar our net income reached 113 million U.S. dollars in the quarter from a loss of $12 million in the year ago quarter.
Moving onto the balance sheet as you can see on slide nine.
Sprayberry previously mentioned during the quarter, we executed the sale of our Plano play in operation.
Resulting in an excellent value creation opportunity for the company.
The proceeds from the sale well may be dedicated to the debt repayment.
The distribution of an extraordinary dividend of approximately 31 million U.S. dollars.
Well, let's put a fall in October 2012.
Additionally, this transaction together with water positive operating cash flow of 3.4 billion pesos.
Well last two face capital expenditure payments.
1.6 billion pesos.
69% of which whether you get it to the expansion project and to repay 8.9 billion pesos of borrowing.
And in the quarter, we thought total cash position of 4.7 billion pesos.
With minus minus a little short term debt maturity of 3.9 billion peso I.
At the end of this quarter, our net debt was reduced to nine didn't meet your newest Doris and our net debt to EBITDA ratio was zero point plus times from one.
17 times in the second quarter this year.
Now for our final remarks, I would like to hand, the call back to Sallie.
Thanks, Michael.
So to wrap up the presentation I. Please ask you to Don to slight there.
The two Switzerland to these challenging times and we are pleased to communicate these achievements I would afford us an opportunity to unknown Westland late 12, what's hot once again, they leave any machine a B.D.A. what else.
The Michelle to go with cement demand. So at the end of the second quarter, what's called feeder you in the last month, we had luggage cement, reaching a record high volume.
Respect this improvement to continue at that point in time.
You'll probably be completely infected to water shortage issue. They force him this positive trends.
Certainly they're going to meet our CBORD, yet Potter from Tommy not all and I've seen things still face different Chinese, particularly on the macroeconomics, but a piece in the sense, we whats called <unk> that did not meet defendants to economy take told us they are helping pull deepness how.
The school Thats, all what own sector.
Yes, it could simply decide oh, what by the way ill, but Asia, we can see that it was an excellent deal done sustaining a magician at Asia.
We optimized the proceeds from the transaction could they can buy import I wish I could though at the time, we stood empty or what outrageous Abbas financial situation.
We have no consenting or.
I would afford in Argentina.
The line is what we keep the pace on the it's a good deal of Lombardi expansion profit explaining to be ready by the beginning of 2021 once.
Once again, I would like to sink our own people and they called though we've done whom these above mentioned the side would have been impossible, especially you didn't do some person things just keep moving forward with this thing, but once I would D and the falseness helps show so far you.
You need we I believe to overcome until in cheese and got US maybe your opportunity on I went away.
We are now ready to take questions. Operator, please open the call for questions.
Thank you we.
We will now conduct the question and answer session. If you would like to ask a question. Please press Star then one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.
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Participants using a speaker equipment it may be necessary to pick up your handset prior to pressing the keys once again star one on your telephone keypad, we would like to ask that you. Please limit your questions to one question and one follow up please.
If you have additional questions you may week to those questions and then they will be addressed and please note that Mr. Self heal Fyfe mine will be responding in Spanish immediately following an English translation. Please hold momentarily well, we assemble our roster.
Our first question is from Alejandro overtake all from Morgan Stanley Go ahead.
Hi, Good morning, and thank you for taking my question I actually only have one and if you could please elaborate on your utilization rates across the different regions, EM and or or assets and whether you are optimistic about getting more pricing power in the next month.
Yeah.
Well the other coming off much of that's important to them.
Good morning, Thank you for your question.
Like the last Saudi caustic depended on message. He does she thought she on that at.
Understood got it no in couple of Chintan I lost you out.
It would be decision, making the plants it depends.
On a monthly basis.
Currently approximately 90% of its utilization it should level out at the gym.
Well, it's entirely see on.
Well the calamity in itself makes it ended up doing OEM. The TMB, most yeah I'm not sure that Amanda.
It is hard to talk about because it takes her right because in this month from September October November we are usually we that are your demand.
I mean look I can give you that shouldn't even got to inject data that kinda kinda able to see it took us yet.
<unk>, we take a look to the clinker capacity utilization, we should be around 80% in it but we did not make it maybe a little bit if you understand in des Moines shop. He didn't have a much older. They Monday cup of tea and looking at Enbridge hubs.
In this last month due to the buckets and then recovery we do have.
More penetration rate.
Dispatching bagging here and dispatching.
Second.
He they did approaching what message so mall, so Denise I think one bloody voluminous.
For the coming month, we're optimistic about the volumes.
They look a little bit I met him, let me know and they came into machado, even that it would be tough to yours and it has been donated the union will get us out.
And we also think that it could be a slight decrease in the in the document.
And.
Most probably a recovery on the bulk because he's the one lagging behind important date it until now no doubt, but you got a get out and do not show not to come down, but you know what I told by doing that I think I mean, despite out there who can you.
Importantly.
To remark that large infrastructure projects not only in the Metropolitan area. We're excited about those when the rest of the country has been it's really not exclusive.
Even the people he Oh do you want the employee, though not piece yet they put a shape to do that all the public I mean, even though some of them yet.
Uh huh.
In the last.
At that time.
There has been some news about some infrastructure projects that are starting.
Starting in the near future.
Thank you and then maybe a follow up here is it fair to assume that the retail demand or the strength. We've seen in the retail demand is coming from the one of the finest area or is there any other region I have outperformed as well.
And now I'd like Monday, Tom, we established and qualification of advice.
No actually demand is quite stable along the country in Latin America, but do you cannot she doing my starting point, but im into what an economical by you all like to Chinacache go.
In the Metropolitan area that bulk cement was more affected you do that they look down restrictions.
Understood. Thank you very much.
Thank you.
Our next question is from Coleman hide from HSBC go ahead.
Hi, gentlemen, thank you for taking my question I have two really quick ones. My first one is on margin I'm just wondering what youre more medium term outlook is for margins in light of the fact that no Lamar leave plant expansion is going to come online next year and I know that you were.
Should we expecting to see some improvement from that flat.
We've already seen you know some pretty big improvement on the margin.
Are you still expecting to see further improvement what do you what's your medium term outlook.
On that front and then the second question would be in light of the sale of your assets in Paraguay.
Could you envision a scenario and a future where you pursued austin assets outside of Argentina again.
Well see my two questions.
And they are putting money gotcha portal to drilling.
Good morning call month, Thank you for your questions.
Right. So the market is im going in English Premier League, almost <unk>, Nick what I might have done it.
Regarding margins a week.
We've not my Leidy expansion, we we should have.
Margin improvement.
I mean, they ticket at Minntac and not say they'd annual production will you'll be English for that money I tell you that while we have dedicated Dick wanted an update of how did you kind of like a template I meant there.
And certainly the biggest margin improvement would not be next year.
Due to the ramp up in the plants. We also have a a ramp up in the margin improvement. Yeah. You said I've been telling you a little hope they must nobody can it get adequately critical appeal it.
He certainly there are two other.
Things and one is.
The energy that thermal energy.
Costs, I know that the needle not an hour and put it onto another option, but until then they would be looking for flat I mean, let me quote out give up those who lost money. So it is very close to what's happening in order to get up in south.
That due to the savings that we observe a recently.
The savings we've lost my lead should be less than what we had expected.
Indeed continue Nicoletta Komodo main gate, you almost have to enable English will not plan on it.
Hi, Neil they did actually when they need it maybe I'm being that much but if you can get them into the market at all so that it can do you will see on the coffee cost let me I can tell you the membership went up.
The other factor has to do with it.
We did volumes yes.
Hi, so normally.
Once we are ramping up.
Production, he got plant, which will also be due to fixed cost.
I think probably a better way.
Regarding front, our white, a given kiloton, let me tell you they can easily more thought I got you I got.
The company had people that any sat in better shape, haidl equal and that little incremental and timing might be able to do that.
Regarding buyer, while we believe that that sale.
Bruce the big capacity of the company to to develop a project.
And then to to say, let him with the right timing on and buy new generation in at the moment the information that they need to go do you like Nick Let me give you an answer.
Yes, I mean that any sandal mcnally teaching that you see on that topic, if I look at it too much on yours.
So at this moment in their board of directors in the Finance Committee we are.
Repricing and reviewing that and that strategy.
For the next five years.
He didn't get old internationally sheet, North Star Mall, and even then when you were not going to do you have more place had he means nothing I can eat into that young audience from Dougherty God, Oh, yeah keep trying to put in place.
I mean, it's a strategic plan, we're not discarding any any alternative it could be growth in Argentina, they either vertical integration or also.
Abroad.
Are they doing it only not anymore.
He spent the last what it could do though because somebody up.
But as of today, we do not have any decision made about these futuresteps.
Thank you very much very clear.
Thank you.
Our next question is from Eric Nagle from Bank of America go ahead.
Yes. Thank you good morning, so just like to know if.
You have some more color on the stimulus program that were announced by the government or earlier. This year just anything you could you could comment thank you.
Sorry, Eric could you repeat your question, we didn't get it actually.
Okay can you hear me there.
Yes, no we'd better.
Okay. So any color you could give us on the stimulus package.
Announced by the government earlier this year, how those projects are starting up.
Or are they going to start anywhere in the near future just any color you can give us <unk> <unk>. Thank <unk>.
Thank you Eric.
A lot of thinking well, you're not opening up the Democrats rental done what can you tell us and are we going to go up on that he thought that's right yeah.
A lot of costs out what he does not have a data.
Yeah. So so that plan the government got plans that we have.
Knowledge about our focus on and how soon.
I think well see right. So we just how seized on gross.
Got it Okay, and then it looks like it might have pulled up across your little bit what the lumpy. When you did a fabulous you'll get a little young, but he and the once a day and programmatic would oldest codispoti simple.
We believe that Weve well up their project 2021.
This week, we should have a better.
Outlook for these plans.
Thank you.
And this concludes our question and answer session.
I would like to turn the conference back over to Tom for closing remarks.
Thank you for joining yesterday, we appreciate your participation and your interest in our company and we look forward to meeting more of you over the coming months, providing financial and business update next week.
In the meantime, the team remains available to answer any questions that you may have thanks, again and they say.
The conference has now concluded. Thank you for attending today's presentation you may now.
You may now disconnect.