Q2 2022 Loma Negra Compania Industrial Argentina SA Earnings Call

We to.

you

And.

The.

followed by zero.

After today's presentation, there will be an opportunity to ask questions. Also, Mr. Sergio Feifman will be responding in Spanish immediately following an English translation. To ask a question, you may press star then one on your telephone keypad. To withdraw 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. Diego Holón, head of the IR. Please Diego, go ahead. Thank you.

Thank you. Good morning and welcome to the L'Oreal 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 Sergio Feichmann, our CEO and Vice President of the Board of Directors and our CFO Marco Grady. Both of them will be available for the Q&A session.

Before we proceed, I would like to make the following safe harbor statements.

Today's call will contain forward-looking statements and I refer you to the forward-looking statements section of our earnings release and recent filing with the SEC.

We resume 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 of the corresponding financial measures is included in the earnings press release. Now, I would like to turn the call over to Sergio. Thank you, Diego.

Hello everyone and thank you for showing us today. As usual, I will begin my presentation with discussion of the highlights of the quarter and then Marcos will take you through our marker review and I will finish your result.

After that, I will provide some final remarks and then we will open the call to your question.

Starting with slide 3.

We ended the quarter with another solid set of results, supported on the positive trend of cement demand that is for placing historical records.

As you could see from our release used yesterday, our assessment EVDA for the quarter reached 63 million dollars, compared with 48 million in the second quarter of 2021.

When mentioned in pesos, it shows an increase of 2.6% year on year. Sustained power production efficiency and increased flexibility supported to a large extent by the recent investment in capacity.

Loma is successfully coping with the complex situation of the global energy market that has damaged cement profitability worldwide.

In this context, we keep delivery solid results, we consolidated a adjustment EVDI margin of 29% and a sound USD EVDI per tone of 36.5%

8% above 2021's 2nd quarter.

Finally, following the dividends that we paid in April and leveraged on our solid balance sheets and cash flow generation, we decided to distribute a second dividend of 81 million dollars, totalizing 126 million dollars for the year, reaching an outstanding dividend yield of 17%. I will now hand off the call to Marco Rabin.

Who will we you through our market review and financial research.

Please Marcos go ahead.

Thank you, Sergio. Good morning, everyone. As you can see on slide 4, the GDP forecast for 2022 was slightly increased in the last market expectation report from the central bank, reaching 3.4 percent from the previous 3.2 percent as the first quarter showed a 6 percent growth. In this context, construction activity measured by the ISAC shows a strong momentum, pulling the general economic growth as figures from the last quarter.

The same month accumulated figures reaching 11.5%. This tendency continued in July , that registered an increase of 9%, which make us optimistic that this trend is going to continue and that we are on track to surpass the annual historical record of 2015. Back seventh, volumes remain solid on the back of residential demand, showing a more and more is the growth, but as in the last few quarters, growth came specially from the back shipment.

As we said before, we are cautiously optimistic for next quarter, taking into consideration that the challenging current political and macroeconomic situation could inevitably affect future growth. Turning to slide five for a review of our top line performance by segment. Top line was up 8% in the second quarter, mainly due to the increase in segment revenues coupled with a positive performance of all other segments. Current measure in segment and line segment was up 6% in the second quarter.

volumes expanded 64.7% from the bulk of concrete demand and ongoing road works in the province of Buenos Aires, coupled with good pricing performance. Finally, railroad revenues increased 5.6% in the quarter year on year. Transported volumes were up 11.4%, boosted by construction materials, while price was negatively impacted by product mix and a lowered average decent transported.

7th and River gross margin construction was slightly upset by the performance of concrete and good results in aggregate. HEN expenses as a percentage of revenues remained flatish slightly increasing 11 basis points to 8.7% from 8.6%. Please turn to slide 8. Your adjusted EBITDA for the second quarter stood at $63 million up 31.7% from 48.

the other segments with lower margins. Seventh segment adjusted VTA, margin reached 32.5% contracted 155 basis points mainly due to a softer price dynamic, a higher energy input, partially offset by an increase in sales volume. In a per ton basis, VTA reached 36.5 dollars per ton, increasing 8% from second quarter 2031.

segment, favored by a better pricing and a higher sales volume. Finally, railroad adjusted DTA degrees 25 million pesos to 73 million pesos for the quarter, with a margin of 3.4%, mainly due to the impact of price performance affected by product mix and an over average transported distance despite the volume expansion. Moving on to the bottom line of slide 10, our profit stood at 2.5%

and the lower gain from the monetary position compensated the loss in exchange rate difference. As mentioned, our net final expense decreased by 0.2 billion pesos to 0.5 billion pesos compared to the same quarter last year due to variations in our debt and cash position and the effect of the real interest rate. Measured in US dollars, our net income for the first quarter was $55 million compared to $49 million in second quarter 2016.

reflecting higher profitability, coupled with the positive effects on taxes paid in comparison here near to the impact of the investment in Paraguay on second quarter 21. Regarding capital expenditure, we spend 1.1 billion pesos mostly for maintenance capex after the termination of the remedy expansion and the corresponding reduction in capital required. During quarter, we increase our debt in $100 million standing at $100 million.

reaching a sound dividend yield of approximately 17%. Now for our final remarks, I would like to hand the call back to Sartin. Thank you, Marcos. Now to finalize the presentation, I please ask you to turn to slide 13.

As we mentioned before, the construction activity in general, and in particular the cement market, is showing a great dynamic consolidating the tendency show in the first quarter and on track to settle a new historic record.

On the other hand, we are going through a complex political and macroeconomic situation.

the scope and outcome of which are still difficult to determine.

In this context, we are very satisfied with the result that we have just presented to you, that remarks Loma's open national efficiency and flexibility, and the commitment to always keep improving, as we state in one of our principles.

We constantly challenge ourselves and it is time like this when we can show that we really stand by it. Looking ahead, I am considering that some volatility could be expected due to the macroeconomic situation and the Zen effects tension.

We are optimistic that the positive trend for the cement is going to continue, and Loma is up to face the challenges.

As always, I would like to thank our people and stakeholders, very important pillars where we support our sustainability growth.

This is the end of our prepared remarks. We are now ready to take questions. Operator, please open the call for questions.

Thank you. We will now begin the question and answer session.

As a reminder, Mr. Sergio Feistin will be responding in Spanish immediately following an English translation. Questions or comments are asked in the video description

To ask a question, you may press star then one on your touch tone phone.

If you're using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then 2.

And our first question today will come from Alejandra Obregon with Morgan Stanley . Please go ahead. 16 Mullins on a

Hi, good morning, Loma Negra team. Congratulations on the results and thank you for the call. My first question is on your recently released sustainability report and your targets and perhaps some of the trends that we have seen in the last quarters worldwide. And by this I mean blended cements gaining a lot of traction either to reduce clinker factor or to protect profitability. So I was wondering if you could elaborate where your clinker factor is today, whether you see space to reduce it even more from where it is and whether...

blended cement is something that you are exploring and could gain some traction in Argentine as well.

Thank you for your question.

Sí, nosotros dentro de los reportes su tentagília. We are defining our metas for the next few years.

Within our report, we are defining our targets for the next few years.

And we believe that regarding clinical factor, we have some space to improve.

And clinker factor and another KPIs is what we are targeting and focusing on to improve and to advance in the next period.

Understood, that was very clear and if I may have space for another question. I have a question on demand. You mentioned that there is a greater contribution from private buildings, from industrial, continued strength and residential. I was just wondering if you could provide some colour in terms of backlog, what you are expecting in terms of verticals for the back half of the year and for demand overall. Thanks. Thank you.

For the second half of the year, we believe that volumes are going to be similar to what we saw in the first quarter. We believe that volumes are going to be similar to what we saw in the first quarter.

where we observe that bulk cement represents almost 40% of the total market.

With some variations between months, we think that this 60-40

breakdown is going to be sustained.

Understood. That was very clear. Thank you very much and congratulations again.

You're welcome.

And once again, if you would like to ask a question, please press star then 1..

Our next question will come from Rodrigo Nistor with AR Partners. Please go ahead.

Hi, good morning. Thank you for taking my question and congratulations on the results. So my question is regarding your pricing strategy. The inflation for Argentina this year will likely exceed 90%.

So, what are you planning to do to reduce the negative impact of rising costs? Thank you.

Thank you very much for your time.

Good morning, Rosío. Thank you for your question.

As we always say, our price strategy is linked to inflation and to the evolution of internal costs of the money. You don't need tono a policy that's different from our standard Google base plan to or to correlate it'll last several years.

In this service, Chinese teachers also training us that this is a very strong course with Coins in the

And as you can see in this financial statement, there is also a very strong cost management.

If you do that, inflation of costs is a focus of attention for us.

There is no doubt that cost inflation is an issue for us that we care about.

But in this quarter, you can see the impact of some of the winter costs that are the higher costs that the company is going to face during the year.

And looking forward, even though we see that the pressure of the inflation is going to continue, we are going to have a

lower thermal energy costs.

Thank you, that was really helpful.

And once again, if you would like to ask a question, please press star then 1. And if you would like to ask a question, please press star then 1.

Our next question will come from Danielle Garcia with Bank of America. Please go ahead. Hello, this is Danielle Garcia, Kim without T-shirts.

Hi, this is actually Daniel Rojas from Bank of America. My question is regarding a follow-up from the previous question. Could you please drill down on the natural gas and the prices you've seen and the prices and the average prices you think you can see in the second half and follow up on that one, the Nestor-Kishner gas pipeline. There has been a lot of talk on the potential benefits for the company. Do you have a timeline or an outlook on these projects and how it can help margins for the company?

of natural gas are above 45%.

Compared to the same period last year. nmotium PO me as the contract of the shame of seraral. Par alas, ina mecaryannia is soon erof the trrend operortion to occaway the pres twelve.

Some of the contracts that we close for the second half of the year are about 30%.

And with what we are seeing now, it has been an increase in energy costs, and it has been an increase in energy costs.

So, we are seeing an increase regarding thermal energy from last year.

but we should see it below the levels that we are seeing now.

Respect to this three <expletive>, the ter of previan, though we think that impact to significant, was looking into in quarter to a yanopluso per paranoterper or fer aryras one of the perioial. Here, regarding the pipeline, we have not seeing effects.

or possibly some effects in the short term.

You have no idea how many stake points are coming from this meeting btw?

probably and seeing the gas demand, we can expect to see some positive effects after the next winter.

Do you have some idea on the level of savings you'll be able to achieve on the pipeline online?

– Enbarzaba de tener mucho de como se en la cuardo de el gas producido adicional cuantos estina el mercado local y cuanto para el esportación. – you

So we think it's going to be linked regarding how many gas is going to be available for internal consumption and how much is going to be available for export.

And especially with the reference price of export that is going to determine the savings that we are going to have with the internal consumption.

Thank you, that's very clear. And a follow-up, if I may. Going forward, what do you think would be the running rate for your dividend in 2020 and going forward? Thank you.

Sort of TA Ian, 10 a political areaion, the crta. We will have written dividend policy. Look at tomo Ian, the pance of mil vegetation. eplement sayira in a politic will have 12 day cur Maxim are like. Assume they a lower power of sociction.

Probably in 2023 we're going to continue focusing on maximizing value for our shareholders.

Thank you.

You're welcome.

And this will conclude our question and answer session. I'd like to turn the conference back over to Diego Halon for any closing remarks.

Thank you, Cole. Thank you everybody for meeting us today. We really appreciate your participation and interest in our company. We look forward to meet you again in our next call and in the meantime we remain available for any questions that you may have. Thank you and have a nice day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.

That.