Loma Negra Compañía Industrial Argentina Sociedad Anónima Q1 2023 Earnings Call

Good morning, and welcome to the first quarter 2023 conference call and webcast.

All participants will be in listen only mode.

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After today's presentation there'll be an opportunity to ask questions.

Also Mr. Sergio placement.

B 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 hung on head of IR.

Yeah go ahead.

Thank you.

Morning, 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 bulk.

First of which was distributed yesterday after market close.

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

Our CFO Mark <unk>.

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

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

This call will contain forward looking statements and I refer you to the forward looking statements section.

Earnings release.

Filing 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.

Full reconciliation of the corresponding financial measures.

Got it.

Our earnings press release.

Now I would like to turn the call over to somebody else.

Thank you <unk> Hello, everyone and thank you for joining us this morning.

As usual I would like to begin my presentation with discussion of the highlights of the quarter and then medical who'll take you our macro view on peanuts episodic.

I will provide some final remark and then we will open the call to the question.

Starting with light too.

We started the year in a very good shape and we are very pleased to share with you another quarter or so.

Amid increasing macroeconomic uncertainty the industry.

The mine recently.

Maintain the positive momentum and 15 another quarter of no.

Bulk cement demand is contributing to this trend who stayed pretty vague and public small influx of talent walks.

Our top line for the quarter debt increased two 9% with Tim volume, we don't win a bulk theme the street and boosted by the increased activity of concrete and aggregates.

I would've thought meant EBITDA for the first quarter, it's too.

$63 million.

Up 15% from first quarter 2022.

When measured in pesos. It show a decrease of 19, 7% compared to the same quarter last year.

Then by inflation.

Although marchand fulfill some compression due to higher energy inputs in the cement segment and increasing participation in the top line.

Segment will know what I'm asking.

We keep on delivering world class, a b D. A machine can.

In defence they used to go not EBITDA per tonne stood up so $40 for the quarter, one 6% are bulk 2022 first quarter.

Continuing while we're focused on maximizing value trial, which I called out at the beginning of the year with a dividend payment of 19.5.

$5 million. Additionally, we recently announced and D. C would in another dividend for the amount of 22.2 billion pesos.

All while maintaining extra balance sheet with a low indemnity right you will see the point 46 times.

I would note one of the call to medical without being who will walk you through our market review I'll peanuts to other types.

Michael go ahead.

Thank you Sergio and good morning, everyone. Please turn to slide four.

You can see on slide four even though 2022 and that posting a 5% growth the fourth quarter started to show a deceleration.

The last market expectation reports from the Central Bank shows a shift in the estimation for 2020 free.

Driving the growth expectation to a native tapes Terry.

Reflecting the increase in the economic uncertainty.

While the construction activity shows mixed results for the first months of 2012 Tiffany.

We have a restriction in February the sermon national and industry says shows a resurgent growth of three 1% for the quarter.

Despite the strong base of comparison and the challenging environment.

Dose ceiling Caesars bulk segment shows a year on year contraction.

While the bulk segment continues to be the dispatch poverty boosting growth.

People's use of the month is a principal contributors to bulk performance.

Given maybe by private infrastructure projects, both residential and industrial.

Coupled with a smaller midsized public works that are gaining more and she says in the shipments.

In defence, one seemed a breakdown by dispatch vote bulk shipments continues to data showing a participation of 43% against 40%.

First quarter of last year.

Even this positive start of the year, we remain cautiously optimistic for the upcoming months as economic volatility would probably increase as we approach the election and this might affect the level of activity.

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

Top line was up two 9% in the first quarter, mainly due to increases in concrete and aggregates revenues that more than compensated the degrees in the southern segment.

779 segment was down three 5% with volumes growing pulp up 3% year on year, we saw softer pricing dynamic.

Complete revenues increased sharply to 32, 8% in the quarter Volte.

Volumes were up 26, 2% in line with the strong momentum of bulk cement.

With good pricing performance.

In the same way aggregate show a significant top line expansion of 65, plus 3% sales volume increasing.

47%, primarily on the bulk of concrete demand coupled with strong price performance.

Finally railroad revenues decreased five 7% in the quarter year on year.

Transported volumes were down seven 4%, while the shrunk transported volumes of aggregates, partially offset the decrease in seventh of trucks out.

Despite the identity the effective price of the lower volume of Frac sand due to its higher transport the distance the prices had a good performance in this quarter.

Moving onto slide seven consolidated gross profit for the quarter declined 15.

0.3% year on year with margin contraction by 591 basis points to 27, 5% mainly.

Mainly impacted by a lower price of 12 months of our core segment higher costs related to hydro thermal energy inputs manager just seamless plus increase natural gas production, partially compensated by the accretion of electrical energy inputs and depreciations.

The significant decrease in sales volumes in Sacramento, where lower margin also contributed to the conversion of the consolidated this season.

The contraction in the seventh railroad a concrete gross margin was slightly upset by a better performance of aggregate.

Finally, SG&A expenses as a percentage of revenues decreased 44 basis points to 9% from nine 5% in the first quarter of 2022.

Please turn to slide eight our adjusted EBITDA for the fourth quarter stood at $63 million up five 8% from $60 million in the same quarter a year ago.

In pesos adjusted EBITDA was down.

19% in the quarter, reaching $10 6 billion pesos, they've consolidated EBITDA margin of 26, 2% constructing 748 basis points year on year, mainly affected by seven margin contraction on the CIO participation the topline of the other segments with lower margins.

Cement adjusted EBITDA margin stood at 31, 2% contracted 625 basis points.

Affected by yourself to pricing dynamics.

Energy inputs.

In our Burtone basis EBITDA reach.

$40 per ton increases of one 6% from fourth quarter of last year.

Concrete adjusted EBITDA decreased 21 million pesos compared to first quarter, two Boston 'twenty, two mainly explained by higher cost of aggregates and freight partially compensated by a positive performance of hydro volumes margin construction of 43 basis points, reaching I think I did want to pursue.

Yes.

Aggregate adjusted EBITDA improved 272 million pesos this quarter from negative 37 million pesos in the first quarter of 2022.

Reaching a margin of 17, 6% reaffirming the good momentum for the segment, coupled with a better operational performance.

Finally railroad adjusted EBITDA decreased 237 million pesos to negative 38 million pesos for the quarter with a negative margin of one 2% mainly explained by lower transported volumes that put pressure on cost partially compensated with better price performance.

Moving on to the bottom line on slide 10, this quarter, we posted a net profit attributable to owners of the company of $5 3 billion pesos compared with a $6 5 billion pesos on first quarter 2022, while the lower operational results coupled with fiber financial bust.

Total financial cost stood at 19 billion pesos. This quarter from a total financial gain of 452 million pesos to the same quarter last year.

The positive effect on the result of the monetary position, partially compensate the decrease of the net financial expense generated due to the higher debt position and the negative effects of the exchange rate.

Moving onto the balance sheet as you can see on slide 11, we ended the quarter with a cash position of $19 4 billion pesos in total depth at $42 3 billion pesos. Consequently, our net debt to EBITDA ratio stood at <unk>.

46 times compared to <unk> 47 times at the industrial pumps in 'twenty two.

Our operational cash generation stood at four 3 billion pesos, whereas the increase in the net profit adjusted was a noncash effects, partially compensated the negative effect of the changes in operating assets, how they have EBIT.

Regarding capital expenditures, we allocated $1 8 billion pesos, mostly for maintenance Capex.

During the quarter, we increase our depth of $19 million outstanding our net debt at $109 million at the end of this quarter.

Breaking it down by currency, there's all other nominated debt represents 40% of the total debt while the rest of the ship basis.

As we mentioned before in the quarter, we distributed a dividend for $19 $5 million and we recently approved a new dividend of $22 2 billion pesos that was paid in kind for larger time Treasury bills.

Additionally, in the quarter the company issue its class one domestic bonds for the total amount of $25 6 billion pesos.

With maturity and our 2024.

Especially issue issuance was well received by the market and he says triangles the trust placed in our company.

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 talent to it later.

To wrap up this presentation I would like to highlight a few final takeaways.

And then do we have places to see how fun the industry remaining at the start of the year Bullshitting widow people eight despite the already strong base of the cooperation we are following with the station the evolution of the economy as we approach the presidential election, which could.

The volume or the industry for the remainder of the year.

In this context, we remain focused on managing the business to keep on delivering strong results.

We consider the maximization of value generation trial will take hold that one of our main objectives. This is quite in addition to the dividend payment that we did do we did in January we listen to the approved our second dividend payment that was deeply within guy seeking to fulfill our goal.

In the most efficient way.

I would like to conclude by thanking all of our people and our stakeholders for their commitment and support. This is end of our prepared remarks, we are now ready to take your question operator, Please open the call for questions.

Thank you we will now conduct a question of intersection.

If you would like to ask a question. Please press Star then one on your telephone keypad.

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Also.

Please note that Mr. Sergio face will be responding Spanish immediately following an English translation.

Please hold momentarily, while we assemble roster.

And the first question comes from Alberto Valerio with UBS you May now go ahead.

I.

Thanks for taking my question.

Question, Oh, what looks even better.

I was a little bit surprised when the results will decrease.

And and eject stance.

I'll be able to handle the global average price, maybe dinos Argentina right now.

So if you could give some color about the contracts.

We had full or does it back after a year and how do we should expect.

Thank you very much.

On the Oh.

They won't do that though with more you know thank you for your question.

Yeah, that'd be came off the needle and when he came in total at the IPO E. L F.

Hello.

Yes.

Now she thermal energy, we had an increase this year and also by the end of last year.

Okay I went on a D check incremental foot on which domain okay.

And we'll know it couldnt help reshape Xi'an well she deal biological Chipmos Shanghai.

Yes, there is that this increment was a plus lower than.

You could see it in other regions.

And they have gone for the near future as social basket.

Definitely we are.

Studied and told them, though you've already hit that it combines machine they redo the loss.

Yeah. This.

This year, we should be around sweep to Oh, no student medium btu value.

Radio contract, Okay must be tomorrow, but at approximate 30 Sanya Shah.

It did at Otis.

Several contracts that we always aim for that over the next few years or are we know.

Hello.

Oh passage, which doesn't get actors.

Yeah.

Oh.

Hello.

Our next question will come from Daniel Rojas with Bank of America.

You May now go ahead.

Good morning, gentlemen, thank you for taking my call just a follow up on the last question in terms of a thermal costs that that contract. You say you signed below $3 is related to the gas pipeline expansion and can we assume that that going forward one of your competitive.

This will be your ability to tap into much lower gas costs are coming from from from Bank of America, and I know it might be too early but can.

Can you share with us the safety issue in terms of EBITDA or OIBDA margins that you think you can gain from these competitive headwind. Thank you.

Okay.

Yeah.

Yeah.

For the portfolio.

Thank you for your question.

Now what I can tell you you know on Sunday Diamino.

The pipeline is slowing or.

Our schedule.

It will be more on yield.

He will give you an edge on some of what I picked up a little Sunday last thing, but I'm not at all.

The forecast production.

Therefore for next.

Your bedroom bodies.

Buddy who the contractor chemo field mouse done eight adults hiseq immune until you see but if someday give you necessarily handle on several of the contracts that we signed are all linked to this.

Bachman.

But it's just some may not close or 12, one but not the name now let me quote analyst Martinez and frozen Lasagnas ambien.

Your comment before on the improvement in the.

The price of the gas that we are their pain.

It's going to lead to an improved also we're not you know we're marching towards the next few years.

In context, when we need to do it I know nobody Oh, no you shouldn't cause even if he got D. U N one bulk crystal <unk>.

<unk> did I say nothing Pete.

Regarding gas supply, we don't see any competitive.

With the with your other seven seven for the Association.

Okay. Thank you I'll follow up if I if I may.

I don't want it.

I'm, sorry for trying to Oh, sorry to become political analyst.

But if you could gauge.

A little bit about happening in the political scenario in Argentina I'm one of the candidates that's leading ground lately has talked a lot about changing the dynamics of how a public bidding he's done in Argentina, how public.

Trucking is done.

I know, it's early but what are your thoughts on the political change that may come on the implications for public spending.

Yeah.

Hey.

Luckily scenario politically we are meant to get round contextual muscular African Dino will that deal.

The muscle political scenarios very well a lot of these states goes to the elections.

Importantly.

Importantly, Calcutta implicated and consume more poorly by integrated medical totality mentor and Dino.

But if you give us your muscle.

I'd like to remark that.

Yeah.

Public spending.

Total volume.

Martin.

No.

Blossom.

Government public spending.

I mean, some people are way too.

So that rate level.

Important important this is important to get Dino Dina done two in golf and you've got to do that you must.

On the structural deficit.

Yeah. It's.

We can see even in housing and infrastructure and channel E.

He stopped me not entail at least identify the T O politicos.

I mean, the point between all the yeah the political parties.

Almost half of it you have to announce he had it yourself. So what else can you do that simple Shinto all liquor mix and Republican Blue Ottawa salary to come into the holidays.

Infrastructural issue should be finance it's.

Public sector.

Yeah.

The private sector or a mix.

It'll be okay in time, I mean, you're going to see marking white either scenario is also with US. She why not do you want us out a signal by eating or no no I understand what you meant but.

Wish you all agree that Oh, we think the Lexington, and if so to roll into the next few years that this input.

Sure deficit should be.

They can go wrong.

Okay.

Thank you.

Yeah.

Again, if you have a question. Please press Star then one.

Our next question will come from.

Any store.

Securities You May now go ahead.

Hi, Good morning, Thank you for taking my question.

Given the current elevated inflation environment would you please discuss your pricing strategies.

Frequency of breaking Greek he says all of these adjustments.

Are impacting demand for your cement products also if you have observed any changes in demand as a result of maybe some fluctuations.

Thank you.

Could you repeat that the last time, we didn't hear you well.

The last part.

I was watching basis.

If you have observed any changes in demand as a result of the recent fluctuations in the blue chip swap rate.

Yeah actually I put it together with Martin. Thank you for your question I believe you got the ADL mentally but it shows that almost all of them on the British you'll Miss Wallace.

Regarding prices are we are increasing prices.

On a monthly basis.

Most of them, but if you must issue enough once you own them, but yeah. I think that's your only impression they called us and gotten us E people, who come to you.

I always say, it's a combination between our ore costs.

Cost inflation.

Okay.

Ladies and gentlemen.

And then in the middle of including Yahoo anymore, but I think I mean, it shouldn't go to middle Miss you anymore, I think amantadine yet.

Yes.

It's part of the year or the later in the year. We are mostly in line with inflation you can probably look at yamana the level at Iliad Mercado.

And.

Yeah.

Market.

In this scenario political simply dry went up with you on it.

The macro situation, we screen some some nice <unk> on the bundle and get them into that elaborate giant that he's built out a C. T. R E M with cheap shula incrementally medico they'll make.

The other hand, when when the gap between the official effects on the Blue chip.

The blue chip effects widens. This typically bring saw some it's a driver for that.

And this concludes our question and answer session I would like to turn the conference back over to Diego <unk> for closing remarks.

Thank you all for joining us today as always we really appreciate your interest in Lamar.

As always we will remain available for any other questions that you might feel that when I say thank you.

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