Q2 2021 Loma Negra Compania Industrial Argentina SA Earnings Call
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Good morning, and welcome to the Loma Negra second quarter 2021 conference call and webcast all participants will be in a listen only mode.
Do you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions also Mr. Sergio <unk> will be responding in Spanish immediately following an English translation to ask a question you May Press Star then one on your telephone keypad.
Draw. Your question. Please press Star then two please note that this event is being recorded I would now like to turn the conference over to Mr. Guests don't Fino.
Our head of IR.
Please go ahead.
Thank you good morning, and welcome to illuminate US second quarter earnings Conference call.
By now everyone should have access to our earnings press release and the presentation for today's call both of which were distributed yesterday after market close.
Joining me on the call. This morning will be sacrificed one our CEO and vice President of the board of directors and our CFO Michael <unk>.
Most of them will be available for the Q&A session.
Before I turn the call over to set a floor I would like to make the following safe Harbor statements.
Today's call will contain forward looking statements I refer you to the forward looking statement section of our earnings release and recent filing with the FCC.
We assume no obligation to update or revise any forward looking statements to reflect new or changed events or circumstances.
This conference call will also include discussion on non-GAAP financial measures. The full reconciliation to the corresponding financial measures is included in the earnings press release.
Now I would like to turn the call over to <unk>.
Thank you lepton Hello, everyone. Thank you for showing us today.
I hope you and your families.
So lets usual I'm going to mention if we highlight of the second quarter, and then medical who will you saw where the bulk of the view Athena has kept us up after that I will provide some final remarks, and then we will open the call total question.
To call so from our release yesterday, we are pleased with.
The second quarter, but eight four months, which was mostly explained by our cement business.
Why do you think that the strong momentum experience in cement sales seen less yellow button, continuing and is already exceeding pre pandemic levels, which unite posting the highest two days since 2016.
Our Dutch operation 11, US just spun out would it be D. A by 74% and expand our margin by 483 basis points posting the best second quarter since IPO.
How you would update us from a labor and cost control more than offset the impact of higher production during winter months compared to unusual second quarter of last year.
I would accept an EBITDA in the quarter was $48 million $22 million higher than in the same quarter last year.
The Covid 19 pandemic of addiction, and nine medial high yet when compared to pre pandemic second quarter 2019.
When measured in U S dollar per ton EBITDA increase compared with the same period last year.
Well, 28% and standing at $34 per tonne.
Regarding our capital that we have a solid balance sheet with a low net debt ratio of Cedar point 13 times and.
Some debt profile.
During the quarter our bottom line was helped by a one off deferred income tax charges related to certain tax reform.
Plus we've elaborated on this later.
Finally in June we know where they did the new pillar in the Bali plant, which is now up and running and producing clinker.
Commissioning of the second line is moving towards completion and is now put a limit for end of September.
We know one of the coal to medical revenue.
Who will walk you through our multiple view Athene that has helped us out.
At least medicals.
Thank you Seth Gilbert.
As you can see on slide four news besides the fears double digit drop of GDP. In 2020 is still expected to be partially recovered by year end.
That's an activity measure by the SEC remained strong.
Recoveries in last November.
In the case of the seventh nationally industry sells the recovery was much stronger.
Felipe the recovery cycle that started in September last year is now starting to etsy for pandemic levels of 2019 second quarter of 2000, <unk> posted a total volume of $2.8 million thoughts.
55% higher than second quarter's deposit, 22% above second quarter 2019.
Breaking it down by segments bulk backup bulk contributed positively to growth, that's where the bulk segments accumulate a longer recovery cycle and is already above <unk>, 1% in respect to second quarter 2019 I'm jealous.
But it's still down around 9% when compared to second quarter, two volatility yet it just experienced a sharper recovery year on year and this was the most hit segment by Covid 19 restrictions last year.
Sequentially the shelf seven salted bug increased from 22% in second quarter surplus of 22, almost 39% in this quarter.
We expect these breakthrough to remain rather stable in the following months with a moderate bulk recovery seasonality I saw Tiger public works activity could fluctuate.
Certainly the economy as a whole suite of patients different tests, particularly on the macroeconomic outlook.
Presentation about GDP growth for 2021 revolve around a six 8% recovery definitely thoughtful pandemic levels.
Turning to slide five for a review of our top line performance by segment.
Consolidated revenues year on year.
Increased by 46, 6%, mainly reflecting the positive momentum experienced by our core seventh business with all segments contributing positively to social covered.
737 life segment was up 43, 4% with volumes, expanding 39, 5% and good pricing performance.
Concrete and aggregates both to the Thunder revenue recovery of 492%.
One fell 7% year on year, respectively.
Barry merchandise sales in the comparable quarter last year had collapsed due to covid 19 restrictions.
In the case of concrete volume expansion of 184% was partially upset by narrative brushing performance on the contrary aggregates experienced sharp volume recovery of 620% together with positive price and mix.
Finally railroad revenues increased by 23, 5% during the quarter, especially the same quarter each of us into 'twenty.
I think I get transported volumes were upset by Buller Brexit performance due to product mix.
Moving onto slide seven consolidated gross profit for the quarter was up 88% year on year with margin expanding by 664 basis points.
As a result, largely driven loyal or seventh business.
Seven gross margin expanded by 411 basis points from 38% to 42, 1% in the bulk of Vega operational leverage on profiting from cost discipline, yet we experienced some pressure from seasonal energy judges.
Winter production in 2020 was abnormally low due to the sharp drop in demand, including cost initiatives took place last year uncertainty.
G&A expenses as a percentage of revenue decreased by 83%.
Basis points to eight 6% from nine 5%.
One year ago, mainly due to cost a little shelf from Tiger says volume, which avoided tiger labor costs compared to last year's level.
Please turn to slide eight our adjusted EBITDA was up 71.1% in the quarter, reaching $4.4 billion pesos with a consolidated EBITDA margin expanding by 483 basis points to 35% in.
In U S dollars, however, ta reached $48 million or 22 million higher than the same quarter, a year ago or 9 million Tiger. The same college, a pulsating D business and the Covid 19 outbreak.
Thanks to our core business segment.
Seventh masonry alive with concrete and aggregates contributing to a lesser extent to a bit of a loss.
Seven and segment adjusted EBITDA margin expanded by 472 basis points of awards, plus 34%, mainly due to the accretion says volume cost dilution.
Posted the best margins for a second quarter listen tiers.
In a per ton basis, EBITDA increased compared with the same period last year around 28% are stood up $44 per ton.
Congress adjusted EBITDA, increasing to 1 million pesos compared to second quarter 2020 explained by lower cost and SG&A in relation to revenues yet margins remained negative.
Six 8% aggregates adjusted EBITDA improved drastically from negative 41 million pesos in second quarter 2020 to positive $13 million in second quarter to closer to do well with large enough, 7.7% as a better pricing mix and volume.
The weighted cost increases.
Finally railroad adjusted EBITDA margin deteriorated from seven 2%.
249%, mainly impacted by product mix, partially offset by higher goods transported volume a lower burden SG&A as a percentage of revenues.
Moving onto the bottom line on slide 10, driven by EBITDA growth and net financing profit before tax stood at three point 30 billion pesos in this quarter. The bottleneck was impacted by the recent tax reform, which English as income tax rate from <unk>.
30% to 45%, including the suspension of the subsequent rate reduction of 25.
This one off effect is equivalent to 3 billion officials inflation has deferred tax charges, resulting in a loss of $1.2 billion pesos.
Besides this impact our accumulated net profit for the year.
Posted positive figures of one 6 billion pesos.
It'll play that game stood up.
292 million pesos in this quarter compared to a net loss of $1.6 billion pesos in second quarter 2020, mainly due to a foreign exchange gain of bulk other 93 million pesos.
In this quarter reverting a loss of 864 million pesos in second quarter, two falls into it as well.
The result of a lower net debt denominated in foreign currency and a real precision on that basis.
Additionally gains on that when we do position was 552 million pesos in this quarter compared to 102 million pesos last year.
Finally, our net financial expense declined by 381 million pesos to 453 million pesos compared with same quarter last year, driven by lower net financial debt.
Moving on to the balance sheet as you can see on slide 11.
We ended the quarter with a cash position of $2.9 billion pesos in total debt.
On slide 4 billion pesos.
Currently our net debt to EBITDA ratio stood at two open foot detached compared to Schuh opened 16 times at the end of 2000.
In this quarter, we reduced our debt into two 1 million standing at $56 million, 83% of which is eliminated in U S. Dollars. Additionally, we repurchased share for a total amount of 111 million visits.
During the quarter, our operational cash generation was almost fully dedicated to income tax payments.
Seasonal working capital requirements.
As always in the second quarter previous year's income tax payments.
Ken.
Particularly this quarter the tax payment of 3 billion pesos.
You did $1.5 billion pesos charge related to last year's divestment he by the way.
When compared to last year's second quarter, we need to bear in mind that in 2020 working capital levels.
So there are several initiatives aimed to preserve liquidity under the abandonment uncertainty.
Regarding capital expenditures, we spent $1.6 billion pesos.
Two 2% of which whether it gets it to the ammonia expansion project.
As a second language I want to be completed so the capital requirements.
Now for our final remarks, I would like to handle the call back to southern Europe.
Thank you Marcos now to wrap up the presentation. Please ask you to turn to slide 13.
We expect cement demand recovery from last year's volume to continues with Francis Unexposed June compared to pre pandemic level of 2019.
For the cycle highs, both seasonality and public works could play an important role.
Yet we are caution as macroeconomic context will affect the recovery at this point in time, but relative to Covid seems more distant however, we remain watchful to evolution of the new variants, both locally and globally.
After integration in June the brand new keen in Emily is starting to produce clinker and it's already contributing to our world class operation. Additionally, the new cement mill and dispatch center and are planning to start up by end of September.
As we recently communicated and in line with our expectation a new open access scheme will rule in Argentina Railroad network amphora.
Home Federal suit broke organization will not meet extending beyond Dod's unit exploration date of March 2023.
Details regarding the new scheme are not yet available. Therefore, we are analyzing different scenarios, none of which should have a material impact on our current business he's on where the most probably it should become an operator continue.
The current operation.
Last but not least I would like to thank all our people.
And let's take hold them for their commitment to lomas operational excellent without whom this set of solid result.
Hub been much harder to achieve.
We are confident that supported by a robust and efficient productive footprint, our solid capital structure and a dedicated team Loma cut the base to continue cleaning in the year to come.
We are now ready to take questions. Operator, please open the call for questions.
Thank you and we will now conduct a question and answer session.
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Also please note that Mr. <unk> will be responding in Spanish immediately following an English translation. Please hold momentarily, while we assemble the roster.
And our first question today will come from Albert <unk> with UBS. Please go ahead.
Uh huh.
Yeah.
Thank you for taking my question.
I would like to know about the background.
The impression that we had here we can always.
Our weekly.
Weaker than that first one but.
We estimate that.
The first quarter.
And we should have preliminary data from July looks like I can pubic subsidiary accelerating again, so my question here.
This is true.
<unk> come a little bit weaker than the strong first quarter.
And Uh huh.
We can expect to recover in the second half of the year. Thank you.
So you are right.
Speaking of what margins or volumes.
Bulk market volume.
But that's the price compared to Europe.
You know a lot of you expect so overall EBITDA.
Were expecting was a little bit higher than what.
Because we saw a very strong first quarter.
Yeah.
Hi, thank.
Thank you for your question.
In the Latin American Canelo touch.
He told us I need to say that because you need to go out and go to the Indiana the bronchial.
So typically during winter months, there's a seasonality effect on our production costs.
And you should I mean, there's no comparison when you think about how to go remote get anywhere so in India, I don't know, but I think I mean no matter most.
Shimada chill it might a chokepoint and glass, we like that don't do the lab on Dania.
Additionally, when compared to the last year.
We produce a very.
Much lower.
Amount of cement and including a lower price of gas.
Derived from the pandemic situation.
And eastern I mean did pretty well.
Although the land.
But oklahoma's munoz lithium commensal outbid at Oh, Yeah, I mean, they have what they might have kept Oriental Canyon Halloween. If he feels that you said you don't want to change a lot of it already.
Yeah.
Additionally.
By this time of the year, we were expecting to be producing clinker with a new kiln normally.
O'malley plants.
Which ended up starting in June okay. So their benefits where were not collected in the in the second quarter and we still producing we were producing in the airplane.
Okay.
Okay. Thanks.
If you could just provide a.
A follow up.
Qualified the SEC hustle, you shouldn't shouldn't we see.
Jackson.
Jacksonville ratings again.
Yes.
The luminous Julio we reported today. The last was just suddenly probably can't if we don't put them on why not put them in a portfolio like <unk>.
So yes as you maybe saw on the FCB.
Reporting.
July numbers were very good and actually they were the second best July in Q3.
Hello, normally don't stop in the middle of the area I want to elaborate affects you on a cake and we'll handle put out but it is directly the land Neal so I'm sort of optimistic.
The first day base of Argos and also there what we foresee for the remaining of the year are quite optimistic.
Well go now protects your umbrella in Europe, when Windows put out that you are a combination of what happened there.
Yeah.
Forecasting for the full year for the industry numbers above the 2019 pre pandemic levels.
Thanks, Dave.
Okay.
Midnight in Philadelphia.
Youre welcome Eduardo.
And our next question will come from Carlos pay rate longer with Bank of America. Please go ahead.
Thank you. Thank you said it shouldn't matter of course for the call. My question is related to a nuc Union O'malley.
<unk>.
Can you comment on the expected margin expansion once you're up and running and provide some timing as to when do you think obese.
New Kim.
<unk> contributed to the margin now we will be operating.
Smoothly. Thank you.
Yeah.
Hi, Thank you for the question.
Let me just say the window market, but had been done with truly no solar elbow lumen doesn't matter Carlos you know <unk> got totally linear he had that amigo.
So the numbers of the market will not only depend on the demand volumes, but also the cost of the energy.
But again English football gateway, a loading really lagging yellow he'll Emily <unk> mutual must be PC antibody can block along another luxury yacht.
Sure.
I mean I'll.
Mutual funds toward it.
So why we are saying that because.
Kim in O'malley plant is much more efficient than they can.
But there are also many other factors playing in.
But if you look at E. S. Hello, no normal weight on my knee. If my idea for CN till may or must have you see anything, Illinois lottery, Yeah, I went up with Cambridge, almost any sunbelt in the U S.
She had me call it'll moderate charter until we read out in the London video with minimal loss Gnome Gosh <unk> got to move to them I might add though came out of China and India are not what I, yes, he ultimately lombardi, calling on pet Coke, Oklahoma MBR guidance.
So the the efficiency of the new kiln.
Regarding the specific consumption kilocalories, it's around 10% better than then well know whatever yeah kian.
We are now analyzing if it's better to run on during the summer with summer costs of energy or during the winter, we have you've seen pet coke on naturally.
Naturally higher energy costs.
A lot more we shut our malls, but O&M, but at the scale at M. D O N E.
Wally I realize you elect a.
If we can save you a shareholder now.
He seemed to me that unless you disconnect IBD, Sarah let me what I might have him do it if that didnt do well see tripling.
So now we are running the Q and it's already.
Working above the guarantee levels.
And we are.
Learning to to produce we'd be with these levels.
Okay.
So a follow up on this so the margin expansion.
And then you mentioned something that the things are running smoothly and we don't have major issues on the pulp side is two to 300 basis points or maybe what was going on.
Consolidated basis did I get that correct.
Yes, yes, that's correct.
Two four.
The percent of margin.
Of margin increase.
Okay, great. Thank you so much appreciate it.
Okay.
Yeah.
And our next question will come from Nicole large lippmann with Morgan Stanley. Please go ahead.
Thank you good morning, gentlemen, and good morning, everyone.
And then Glenn Congrats on good numbers two questions or one question I guess I'm going out to so I'll break it into two one I was wondering if you can give a bit of details on asset allocation.
Given the change in the concession if youre thinking about a bit of a plan b might be expanding your fleet of trucks in case that there could be some disruption.
And also so the second part of the question would be how do you guys feel about aggregates in Argentina. These days. Thanks.
Thanks, a lot of thanks for taking my questions.
Yeah.
Sure.
Okay.
If you've already Nikola.
Could you repeat the questions because we can't hear the first part.
Oh, sorry about that my question relates to whether you got Astra rail concession comes to an end and of course yeah.
Every time that happens, there's a certain amount of risk associated with the new framework are you considering increasing.
You'll have a very strong balance sheet are you considering buying a bit of increasing the fleet for logistics in case, this I need any sort of disruption.
Also how are you how are you seeing the aggregates market is that something that youre looking at in terms of possible use of cash making acquisitions in that space.
Hi, Nicholas Thanks for your question.
Correct.
And with time.
Time will be in the incremental cost of split up in Atlanta.
So regarding the rate, where we do not foresee a.
Cost increases.
From now on.
<unk> tomo.
I'm, hoping someday in Montana.
<unk> now paid out to your own more paid out of the water in it.
Alright.
And initially we are planning to keep our operation as an operator in that in those trucks.
TVN and Congress.
The Q&A is going to be I don't know the Como cobble.
I will hit Guy I know when you're a mass market industrial David Yes, Haiti, why I like to I Hope, we'll shoot them into one let me quote I Wonder if you can tell.
<unk> seen if he got a well short of guidance.
Oh Capex.
Yeah.
Yeah. So.
Yes. Besides the fact that you have there are no the details from from the government regarding Gan on another another park doors.
We expect either to maintain or to even increase regarding the lower capex requirements.
Got it and can you comment on whether you are seeing any opportunities in the aggregates market.
Argentina.
Okay.
And so.
I'm doing good as Ted and they will show the ADR Rose <unk> 50 megawatt envelope Martinez and Sandra and we'll weigh that might've been accumulated Hello Damian.
So we're not.
Thinking on expanding on the aggregates business.
But we are increasing margin thinking on what happened during the pandemic.
Nicola.
One important thing.
There's demand sort of arena.
Did I read that linear both globally the ambient animals.
So 90 days eight one.
The capacity yellow keep you got parallel most out of almost of it when I go back a gem product candidate.
Fully dealt with decided in medical in front of me.
So.
One important point regarding the the right ways.
And we are we.
Considering the analytic tool we.
We have an advantage because an additional 9 billion because we are we are not going to rely that much below my Saturn and we're going to increase their dispatch capacity from longer lead to.
Got it thanks, a lot guys.
And our next question will come from.
Christina <unk> with AI partners. Please go ahead.
Hi, good morning, and thanks for taking my question on four of the presentation.
So I'm going back to the estimates for cement and shipment.
Or are these here so the construction sector is showing the most dangerous dynamic that you were talking about.
And many attribute this to the FX GAAP. So what do you think is behind the recovery. That's a first question.
And then as a second question.
James Thank God bulk salons Olympic coverage of pre pandemic levels. During this theory.
Thank you.
Hi, thank.
Thank you for the question.
Schindler cadence Gila retired people, who can be a great market.
Nobody Larry Amanda.
So there are no doubt that the they've got between the FX rates.
It has an impact on demand.
The median income will handle now mentally what do you think a lot of Cowen.
<unk> cost for adult <unk> got it no no that's important.
But I'm going to turn in a bite out of us.
We also observed an increase in probably works, especially small public works.
While larger public works are still.
Hampered.
The Amendment Muslim income.
And consumer like India, you didn't go to Blake pointed up on the EMEA.
Luis Miranda, but I read Boyd asset unless you're in a few months ago quite good even with the munis with that our Q&A and they'll buy the thing I'd want to chew on.
And we also observed a consumer behavior to expand the places where they lead and this is IV sharing driving demand.
Correct.
And I wouldn't take it on an <unk>, Julio <unk>, who you'll push with <unk>.
Pardon me everyone. It appears that our speaker has disconnected please wait where we.
Rejoined them.
Sorry, we're having a small alicia we are going to be back in two minutes sorry for that.
Okay.
Okay.
Pardon me I have rejoined the speakers.
Okay.
Jonathan.
Hello.
Yeah, We've got who you know well.
Thank you thank.
Thank you now eight <unk>, a fundamental compact Julio contradictory ambition way until they ban the EMEA volume in total in those periods that live I mean, this will be the Europe Gordon did I need on bulk etonian Dominion.
<unk> allows us with video.
So when when we absorb July yes.
We have a startup we are about.
Pandemic levels and then when you when you take a look through bulk it's a slightly lower than 2019 and bag is slightly higher than 2019.
It does hit simultaneously.
Kind of some quite enabled oriental doesn't matter.
And we are already we both volumes closer to 40% of total.
And market volumes.
Perfect.
Thank you.
And our next question will come from Albert Bell Boll Rio with UBS. Please go ahead.
Thank you for taking my question.
Yes.
Backwards.
Uh huh.
No bulk we know that.
I think as you may remember covid restrictions capsule.
Yes.
My question <unk> can you guys go reach the buyback.
So there are a lot of how you are asking about the buyback.
Yes, it's how much how much margin you can you can bridge.
Yeah.
Volume that we are applying for the <unk> program.
<unk> is what we are allowed to do in the local markets yet.
So in the last.
<unk> $2 million.
Sure Matt.
That's the one that we were achieving.
We spent almost 5 million during the quarter.
Perfect and then for how long can you keep.
Doing the buyback there is a limit.
Sure.
<unk> you didn't bring them all.
The limit is 10% of total.
Capital affluent area that shows facilities.
Plenty of room.
Okay perfect. Thank you.
Youre welcome.
And this concludes our question and answer session I would like to turn the conference back over to <unk> for any closing remarks.
Thank you for joining us today, we appreciate your participation and your interest in our company. We look forward to meeting more of you over the coming months and providing financial and business updates next quarter in the meantime, the team remains available to answer any questions that you may have thanks, again and stay safe.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
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