Q3 2022 Loma Negra Compania Industrial Argentina SA Earnings Call

Good morning, and welcome to Loma Negra third quarter, 2022 conference call and webcast.

All participants will be in a listen only mode.

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After todays presentation, there will be an opportunity to ask questions.

Also Mr. Sergio pipeline will be responding in Spanish immediately following an English translation.

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Please note this event is being recorded.

I would now like to turn the conference over to Mr. Diego, how long that of Investor Relations.

Yeah go ahead.

Thank you.

And welcome to <unk> earnings Conference call.

By now everyone should have access to our earnings press release and the presentation for today's call both of which was distributed yesterday after market close.

Joining me on the call. This morning will be central Buschmann, our CEO and Vice President of the board of directors.

Our CFO Mark Okay.

Both of them will be available for the Q&A session.

Before we proceed I would like to make the following safe Harbor statement.

Today's call will contain forward looking statements and I refer you to the forward looking statements section.

Earnings release.

<unk> filings with the SEC.

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 of 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 <unk> Hello, everyone and thank you for showing us today.

I would like to begin my presentation with the discussion of the highlights of the quarter and then Marcos will take you through our market review and see a nice tell us at all.

Stepped up I will provide some final remarks, and then we will open the call to questions.

Starting with slide three.

That 2% a very good third quarter with a result that shows that are both less of Lama on the back of positive momentum for the salmon industry. Despite the challenging macroeconomic scenario.

Live with us in our recent capacity expansion.

US more productivity flexibility and efficiency without a company they would owe when demand with southern C. B.

The bad clubs, so future Mercado.

As you could see from our release yesterday, I would supplement EBITDA for the quarter, reaching $68 million compared with 51 million in the third quarter of 2021.

Achieving a record for the quarter.

When measured in pesos show a decline of 12.7% compared with the third quarter 2021 shafman by inflation.

Our third quarter are usually impacted by higher energy input our consolidated EBITDA.

EBITDA margin stood at 22.1% why they use boules that EBITDA per tonne Pritchard Citi for Paul Knight.

16% above 2021 first quarter.

We've mentioned in our last call, we disagree with the second dividend of $81 million for enough Cumulated total of 126 million. This es in the same sense. We've recently approved a new share repurchase program for 1 billion.

<unk> pesos that the will be in place deal then of the year.

I will now fund of the coal to medical had he who will walk you through our market review on Peanuts held aside please.

Police Medical's go ahead.

Thank you said it feels good morning, everyone. As you can see on slide four the GDP forecast for 2022, well suggested upwards in the last month of the association reports from the Central Bank.

Between focal and 1% from the previous three 4%.

Preliminary figures for the second quarter stood at six 9% growth.

When looking at the construction has to do with your fingers the level of activity measured by the Isa show the tendency of the previous quarter remains strong shoulder to silence in political.

Douglas.

But people seven national industry sales are going to understand the momentum and in this quarter in our new historical level.

10% from third quarter to a two one while the nine months our committed volumes show an increase of 11%.

So that seven month, Dana Saudi the evolution supported by a robust demand of the retail sector. What about seven continues to be such a morality does this activity and the breakthrough designation.

Driven by a higher level of activity private infrastructure projects residential and industrial.

Campaign, accompanied by a modest level of activity of public works, mainly in the municipal and provincial level.

When she and the breakdown by dispatch mode.

Shipments continues to Ventura showing our participation.

A 43% I guess, 40%.

In third quarter of last year than this year's quarter continues.

Even though the rest of the doors that doesn't show a slight decline compared to October two plus a 'twenty one and those are sequential decline I guess September . This is mainly explained by the lease working days as of October when looking at the average daily volume dispatch of doors remain about September figures.

Optimistic that the industry will break the 14 million tons for the first time in history. This year.

As we mentioned before even though we are optimistic within a quarter of them are broke.

But its challenges, especially the grocery inflation and the effects of social cause I'll go shadow future growth on the other hand, the political scenario would probably increase extension as we approach the government presidential election next year.

Turning to slide five for a review of our top line performance by segment.

Top line was up four 2% in the third quarter, mainly due to the increase in segment revenues, coupled with a positive performance of concrete and aggregates that compensated a decrease in revenue.

Some of my daughters, seven deadline segment was up four point to 8%.

Strong expansion of volume up 12, 9% year on year, we have a softer pricing dynamic.

We'd rather use increased sharply.

Two 7% in the quarter volumes were up 35, 6% in line with the strong momentum will Bucks a month.

Coupled with good pricing performance in the same way aggregates show a robust revenue has a bunch of all 54, 7%.

Volumes increased 65% primarily on the back of winter months.

While our price performance was affected by a positive mix.

Finally railroad Robin has increased 7% in the quarter year on year.

Total volumes were up five 5%.

Most of that construction materials, while price was negatively impacted by both a mix that's conducted to a lower average transported distance you into the car.

Right.

The construction of the waterflood yourself Brook chat.

And going to slide seven consolidated gross profit for the quarter declined 13% year on year with the margin contracted by 448 basis points to 21, 3%.

Mainly impacted by a lower price performance of our core segments.

Hi, good depreciation to the completion of the analyst second line.

Good energy inputs related to the winter peak.

Actually upset by a broker cost management due to our operational improvements and lower natural gas availability.

Seven a railroad gross margin contraction was slightly upset by a better performance of concrete.

And good results in aggregate both related to negative margins in the third quarter turned to us.

SG&A expenses as a percentage of revenues to remain flattish.

Slightly unleashing by 11 basis points to seven 8% from seven 6%.

Please turn to slide eight our adjusted EBITDA for the second quarter stood at $68 million setting a new record for the quarter up 33, 4% from $51 million.

In the same quarter, a year ago bolstered by our top line. Another quick cost management in basis, adjusted EBITDA was down 12% in a quarter, which is seven 5 billion pesos.

Consolidated EBITDA margin of 22, 1%.

Constructive, but still kind of 26 basis points year on year.

Only affected by Simmons margin of infection and the higher participation in the top line.

What was the other segments, where solar much seven and segment adjusted EBITDA margin reached 21 24, 2% contracting 500.

16 basis points, mainly due to a softer pricing dynamic.

Energy inputs, partially offset by an increase in sales volume.

In a per ton basis, EBITDA reached $34 per ton, increasing 16% from third quarter into it.

Adjusted EBITDA increased 155 million pesos compared to third quarter two into one mainly explained by a positive performance in high volumes with margin expansion of 637 basis points, reaching two 4% and reverting negative Peters aggregator.

EBITDA.

Group for 1 million pesos in third quarter and two one to 100 on 1 million bushels this quarter, reaching a margin of 12 one.

2%.

Showing a gradual recovery per well.

Well I guess as volume was supported by strong collective performance, coupled with logistic efficiencies.

Finally railroad adjusted EBITDA decreased to 204 million visits a negative 3 million pesos for the quarter with a negative margin of suitable 12% mainly.

Mainly due to the impact the breakfast 12 months afflicted by both mix and a lower other transported distance.

But the volume of sponge.

Yeah.

Moving on to the bottom line on slide 10, this quarter, we posted a net loss of $12 2 billion pesos compared with $2 7 million pesos profit.

Our third quarter 2021, primarily affected by the financial result.

Total financial costs stood at $15 3 billion pesos. This quarter from a total financial cost of 0.6 billion pesos with the same quarter last year, primarily explained by the fact produced by the cancellation of dollar denominated debt with local funding coupled with the increase of the total debt position.

This increase in net financial expense was partially compensated by the gain on the net monetary position.

Moving onto the balance sheet as you can see on slide 11, we ended the quarter with a cash position of three 5 billion pesos and total debt of $23 2 billion pesos.

Sequentially, our net debt to EBITDA ratio stood at <unk> 54 times compared to minus zero point Cook times at the end of 2021.

Our robust operational cash generation stood out.

11, 4 billion pesos, reflecting a positive effect of Texas base in the comparison year on year that condensate is higher working capital needs.

Regarding capital expenditures, we spent $1 6 billion pesos.

Mostly for maintaining capex after the elimination of the ammonia expansion and the corresponding reduction in capital requirement. If you will.

This quarter, we increased our debt in.

And $48 million standing our net debt at $134 million at the end of the quarter.

Breaking it down by currency will reduce our exposure to the minute the depth that now represents 40% of total debt, while the rest of tissue basis.

This rebalancing also seeks to take advantage of that goes negative real rates in short term basis.

Additionally, in July we distributed a dividend $81 million.

That's confusing to live in and paid in April represents of even the yield of approximately.

17% on $1 80.

Outstanding.

Although the slight increase in indebtedness the balance sheet of Lamar remains very strong with low leverage ratios.

Now for our final remarks, I would like to handle the call back to Sergio Thank you.

Thank you Marcos now to finalize the presentation I. Please ask you to time just late 17.

As you could see the semi market in maintaining its good momentum and we are confident that this tendency is going to continue as the main drivers remain in place.

Probably this yes, the industry is going to set a new record.

For the first time, the 13 million tonne smart.

In this context, we are profiting from our recent investments in capacity that not only allow us to Washington D. Attain the high level of activity show by the industry, but also give us the platform to absorb future growth.

On the other hand, the current political and macroeconomic situation remains very delicate.

Fix that picture and the increasing inflation, how do you think was challenging for the economy in the short term.

In addition, the political scenario who's done more complex and we get closer to the presidential election.

Regardless of this difficult context, we are confident in the resilience of the industry and we are culturally optimistic for the upcoming quarter.

Finally, this November Loma commemorates fight yeah listing and diversity both in the New York stock exchange and they want to say this is the market.

Without adult use has been and it could have been as children, where it would have grown and evolved as a company.

For that I want to thank you our people and our stakeholders for making this possible.

This is then after our prepared remarks, we are now ready to take questions.

At April please open the call for questions.

Thank you.

We will now conduct a question and answer session.

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We also would like to ask that you. Please limit yourself to one question and one follow up please.

If you have additional questions.

Thank you for those questions and they will be addressed.

Also please note that Mr. Theriault, five spin will be responding in Spanish immediately following an English translation.

Please hold momentarily, while we assemble our roster.

Okay.

The first question today comes from Daniel Rojas with Bank of America. Please go ahead.

Good morning, Thank you for taking my call your cash flow generation has been benefiting from Europe .

Our capex requirements.

Normally my question was regarding what level of Capex should we expect going forward I'm basically it's gonna be maintenance the absolute level or any.

Color that you can give us thank you.

Okay.

Hi, Danielle.

As Marcos how are you I would say that that maintain and capex should be on the order of $40 million to $45 million, Florida.

Yeah.

And additionally in the coming years in D. C are in 2000.

'twenty three on July 24.

Where are we investing in you know the equating securities too.

225 kilos.

The box, yes, and that's gonna be.

Total sum of nearly $15 million for the next.

Two to three years.

Yeah.

Great and in terms of pricing, it's been soft throughout the year in real terms going forward do you see any possibility to recuperate prices in real terms or how do you think the challenging environment will make that more difficult.

Okay.

Yeah.

Prices are moving.

By inflation or slightly above inflation.

Uh huh.

Not seeing D C.

Any N D D area.

In that movement.

Okay. Thank you.

Youre welcome.

As a reminder, if you would like to ask a question. Please press Star then one to enter the question queue.

This concludes our question and answer session.

I'd like to turn the conference back over to Diego, how long for any closing remarks.

Thank you for joining us today as always are with you.

We appreciate your interest in Lamar.

And we look forward to meeting you again in our next call in the meantime, the team remains available for any questions that you may have thank you and have a good day.

Okay.

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

Okay.

Yeah.

Yes.

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