Q2 2023 Loma Negra Compañía Industrial Argentina SA Earnings Call

Good morning, and welcome to the Loma <expletive> second quarter, 2023 conference call and webcast all participants will be in a listen only mode.

So do you need assistance. Please signal conference specialist by pressing the star key followed by Sorel.

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

Also Mr says.

Five men 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 like now to turn the call for silver to Mr. Diego, How long head of IR. Please vehicle go ahead.

Thank you good 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.

One of which was distributed yesterday after market close.

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

Our CFO Mike <unk>.

Most 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.

<unk> filing with the SEC.

We assume no obligation to update or revise any forward looking statements.

New or changed events or circumstances.

This conference call will also include discussion of non-GAAP financial measures.

A 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 joining us this morning.

I would like to begin my presentation, we can discuss some of the highlights of the quarter and then but of course, we couldn't you to our market view on peanuts.

After that I will provide some playing out for months and then we'll open the call question.

Starting with slide two.

I'm very pleased to present you the second quarter as we are.

Satisfice, we'd got a third achieving during the speed.

Macroeconomic slightly and increasing political uncertainty as we are.

The pressure inside the lakeshore started to affect.

The level of economic activity.

In this context the construction activity.

Industry remain vigilant.

We'd say volume tracking second for the second quarter totaled NIS 30 cause damage. Despite showing a decrease you have only a.

What is that.

For the first six months of the year set a new headquarter Luckily supervising the market reach you in 2022.

Our top line for the quarter, reaching 51 billion pesos decreased six 5%, but Emily you the contractual our coating segment cement.

Partially compensate for the good performance of concrete, reflecting the positive momentum of the buy dispatch model.

I would've thought meant EBITDA for the second quarter that is too cheap.

The $3 million.

Is that from the second quarter 2022 when.

When measured in pesos, we show a decrease of 26, 1% compared to the same quarter last year adjustment by inflation.

Consolidated margin seafood, some compression primly due to decrease in the cement segment and the increasing participation in the top line complete with lower much. Despite the contraction the modest for the cement segment continuing to rank among the world class EBITDA margin.

In the industry.

In defence they used to doing that EBITDA per tonne is two.

36, well eight dollar for the quarter, 1% above last year second quarter.

He said I know what us to keep on maximizing value 12, which I called that in defense. This quarter, we announced two dividend payments.

The one we did in January sounds the total amount of approximately $120 million representing approximately one bullet.

And we are achieving the always maintain a strong balance sheet with no indemnity type deal to a stood at <unk> 82 times.

I would note one of the call to Michael what I'd be who Worldview four market the view on peanuts episodes released matter.

Go ahead.

Thank you yourselves Jill good morning, everyone.

Please turn to slide four.

As you can see on this slide the last market expectation both from the Central Bank.

Sunday, our estimates for 2020 feet.

Reflecting the increasing economic uncertainty and a lower level of overall activity.

While the construction activity should shows mixed results for the first half of 2020 free.

The summit national or the industry says show risks Islands.

Despite posting a decrease of one 9% for the quarter.

The second quarter is our second best.

In history, all in the Sun.

Second quarter of 2022, and the accumulated figures for the first half of this year is record for us.

For the whole industry.

Although stealing high figures Bach chairman he says such vote showing construction.

Reflecting lower demand from the retail sector.

On the other hand.

<unk> seven continues to show solid growth.

By concrete business of the month.

Most of mainly by private infrastructure projects and public works.

In defense when seeing the breakdown by dispatch mode, but she expense continue to gain Terry showing our participation on a 45% I guess, 43%.

In second quarter of two Boston 22 are.

Reaching a record high for the quarter.

Even considering the strong resilience of the some of the industry.

The lower activity level of the economy in the recent months together with the high inflation reflects the effect of the economy.

Alan just double weave un-english uncertainty driven by the upcoming elections.

For the second half of the year, we had spoke volumes to be slightly below the 2022 fingers.

But to remain robust shape historic terms.

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

Top line was down six 5% in the second quarter.

Well, it's a good.

Top line performance of concrete and aggregates partially upset.

Seven tons level.

Settlement nicer than the cement and lime segment was down 12, 4%.

With volume contracted three 6% year on year.

Mainly due to a decline in Bud seven sales.

Got burned by itself took by the dynamic that even more with inflation.

So a decrease due to cargo market inflation figures.

Plus adjustment items.

Concrete revenue increased 26 six percentage of quota.

Volumes were up 14, 1%.

<unk> in line with the strong momentum of bulk cement.

Coupled with good pricing performance.

Private construction and public works, especially oven they've been our roots projects in the bonus of one sided.

Most of this budget.

Aggregates segments show when expunge of one 8%.

Our sales volume down eight 3%.

Most of these are two operational setbacks that affected his budget.

<unk> been settled with strong price for 12 months.

On the other railroad revenues decreased 14, 4% in the quarter year on year.

So I suppose that volumes were down nine 6% affected by these accretion just puts a burden yourself with accent and I wouldn't base.

The lower volumes of Red Sun also affected the average price per ton.

As it is by far the publics with longer average transported distance.

Moving on to slide seven.

Consolidated gross profit for the quarter declined 21, 1% year over year with margin contracting by 447 basis points to 23, 7%.

Mainly but by a lower price performance and sales volumes of our car segment.

Partially compensated by better performance in concrete.

Regarding the southern segment as accretion electrical energy inputs and lower depreciations.

To mitigate the gross profit compression.

Also the increasing sales volumes and segments will have lower margins. In this case concrete also contributed to the compression of the consolidated that this treatment.

Finally, SG&A expenses as a percentage of revenues increased 68 basis points to nine 4% from.

From eight 7%.

In the second quarter of 2022.

Please turn to slide eight our adjusted EBITDA for the quarter stood at $63 million remaining flat from the same quarter, a year ago and maintaining very strong figures.

In pesos adjusted EBITDA was down 26, 1% in the quarter, reaching 11 7 billion pesos.

<unk> consolidated debt to EBITDA margin of 22.9% contracted 608 basis points year on year.

Mainly affected by seven margin contraction.

Tiger participation in the top line of concrete a segmental lower margins.

700 adjusted.

EBITDA margin stood at 27, 1% contracting 536 basis points.

It mainly affected by lower top line performance.

In our boat on basis, EBITDA reached 36.8 U S dollar per ton, increasing 1% from last year second quarter.

Concrete adjusted EBITDA increased 287 million pesos compared to second quarter of 2022, mainly explained by the positive price performance outside the volumes margin expanded 580 basis points, reaching two 7%.

Aggregate adjusted EBITDA decreased 62 million pesos this quarter from 138 million pesos in second quarter 2022.

Reaching a margin of five 3%.

The segments positive momentum and conduct some operational setbacks in the quarter, which woman severely affected dispatches.

Finally railroad adjusted EBITDA decreased 125 million pesos to 42 million peso for the quarter with a margin of 0.8%.

Mainly explained by lower transported bulge of soft rock sand and aggregates that put pressure on cost and the chinas of the integration for Exxon in the average spud to discuss that data to impact the average price per door.

Yeah.

Moving on to the bottom line on slide 10, this quarter, we bolstered our net profit attributable to owners of the company of $2 5 billion pesos.

Compared with $5 4 billion pesos.

On the second quarter of last year.

Well the lower operational result was coupled with Chicago financial cost.

Total net financial cost stood at 3 billion peso seen this quarter from adult our financial cost of 0.7 billion pesos the same quarter last year.

Mainly due to an increase in financial expenses, well up to a higher debt position.

Hi, good data to see the effect of the exchange rate variation, partially compensated by a positive effect of the result on the monetary position.

Moving on to the balance sheet as you can see on slide 11.

We ended the quarter with a basketball shoe shows 24 1 billion pesos.

Total debt of $71 7 billion pesos. Consequently, our net debt to EBITDA ratio stood at zero point 82 times compared to zero point 37 times at the industrial falls in 'twenty two.

Our operating cash.

Generation stood at $11 9 billion pesos.

While the increase in the net profit adjusted with noncash FX, coupled with a positive effect of the changes in operating assets and liabilities explain their bus duration I guess.

Second quarter 2022.

Regarding capital expenditures, we allocated $3 1 billion peso smartly for maintaining capital expenditures.

During the quarter, we increased our depth in seventies seven maybe.

Media in U S dollars Stanley our net debt at 180 686 million U S dollars at the end of this quarter.

Breaking it down by currency the adult Dev represents 53% of the total depth, while the rest is in pesos and in.

Significant button U S.

As we mentioned before in the quarter, we announced dividends payments for $35 9 billion pesos.

The one announced in May less pain going through <unk>, while the second one was announced in June and the payment of the West made effectively in July and it was paid in cash.

So far this year we have.

Paid approximately $120 million, which is equivalent to approximately $1 per ADR.

Additionally, during the quarter the company issue, it's glass jaw domestic bonds denominated in U S dollars for a total amount of $71 7 million U S dollars.

With maturity in December 2025, and accruing interest at a rate of six 5% per year.

The response for the market is strong the market was very positive and ratifies.

The best of countries in Europe .

Now for our final remarks, I would like to handle the call back to Josh.

Yeah.

Thank you Marcos now to finalize the presentation I. Please ask you to turn to slide 14.

To finalize this presentation I would like to highlight if you find that figure was.

We might need to achieve so you've decided despite the prevailing political and macroeconomic change during the period.

Already affecting economic indicated the last monthly estimates of economic activity police body index.

As we approach the patient selection, we gotta wear will still grow when political uncertainty.

Which adds complexity to the business environment.

Nevertheless, the he industry.

Krishnan.

2023, we'll provide end up by the second best Yeah. He study interim wholesale volume.

This robustness could be with our strategic approach put us in good shape to navigate through these obsolete and maintain a strong path for months.

With subs reached significant milestones.

The hard work and dedication of our teams.

We extend our gratitude to trouble employee customer and business partner and a community where we operate for their ongoing support and we look forward to a prospect and sustainable future.

Just end of our prepared remarks.

Now we're ready to take your questions operator, please open the call for questions.

Thank you.

Well now conduct a 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.

Question queue.

You May press Star then two if you would like to remove your line.

All participants.

Equipment.

It may be necessary to pick up your handset.

Pressing the kit.

Once again Star then one on your telephone keypad.

We also would like to ask that you previously meet your question to one question and one follow up please.

If you have additional questions you may we quit re queue for those questions and then they will be addressed.

Also please note that Mr. Sand Hills, five men will pivot responding in Spanish immediately following an English and English translation translation.

Just hold momentarily, while we assemble our roster.

Yeah.

The first question comes with.

Rodrigo <unk> me start with Latin Securities. Please go ahead.

Hi, This is Panama.

Really Newport Rhodri when he got it thanks for the opportunity.

Asking questions.

It's up to you in the industry recently similar ratio what are your share count.

And the second half of the year, especially regarding the balance between bulk bulk sales.

That's the first one.

Well the second one is additional Italy, considering the election year, all going well.

What do you expect in terms of pricing uncles brochures, and what can you do to offset the snake eyes.

Yeah.

Hi, Thank you for your question title deal.

And I picked all of our aluminum body language.

No that won't really be endorsing that begin yes, I see that as a few because he does a few underpinned golar Palo excuse me that will give you an appointment that.

Regarding volume.

For the next of the for what remains of the year.

Taking a slightly consideration.

Well, that's what we have seen in the last couple of months, but if you do that and maintain Julio.

Both of them in auto, but impactful duello effectively got nationwide are doing well.

Particularly in July the volume was affected.

Bad weather.

G Emerald Illumina Italia I want to talk to me when you O'neil.

They remain gala.

You can see.

What is going on in all of those.

You can see that volume and sort of more like a more like Oh June was slightly lower.

Thank you Joe.

A couple of hiccups young Muslim United Daniel.

But with any of my fellow <unk>.

Yes.

With these restrictions, we expect to and don't kick in between.

Even.

Down from the 22 figures, but we.

We named him the second best year.

She says.

Okay.

Martinez.

One can look at that they carry.

Government that but it's you'll see in Minneapolis in the Gulf.

Regarding prices and margins.

We keep on our strategy.

Implementing prices are keeping.

Keeping people marching sudden and considering what people along that path.

It's really about how do you think the anecdote video connected machines.

Equally remora Pasadena.

But glenn.

What happens with this.

Uh huh.

How you can say shouldn't be up.

Some some delay in adjusting our pricing didn't help them simple.

They don't like the market.

And then you've got somebody do I, but I can do it.

Yeah, I'm not expecting any competitive change.

Change.

We have been seeing in the last couple of things.

Yeah.

Okay.

Okay. Thank you very much.

Yeah.

Yeah.

Yeah.

The next question comes with Zen Young Girl House with Bank of America. Please go ahead.

Good morning, gentlemen, thank you for taking my call along those lines for the second time of the year and the outlook.

Regarding natural gas prices, what are you expecting the trend to be and how do you expect this to impact margins and this in light of the fact that you've started hooking up to the next two keester gas pricing. Thank you.

Okay.

Yeah.

Oh, Yeah, yeah. Thank you for your question.

Hey, good I think that I'm pretty sure he glass and do even more we didn't bear in millennial bus how momentum I'm pretty sure that once I believe us.

Regarding natural gas we have.

Lucky.

Great.

But we are closed.

<unk> I mean.

It can be I don't know.

Those prices were up to this winter.

In the Danville do it had been in the more contracted the Rockies Hamilton micro companies have seen video of it.

Yes.

September and October we started new contracts with prices below the ones. We closed last year is it shouldn't I mean that was a contract those.

I didn't hear anything from video to the same architecture that you have.

Can you update on what your blood.

That's a difference from what we did in the past Newport and Prescott.

It sounds like.

Besides in principle.

Hey, Mark.

Kathy.

Can you be against that in both of them methodically and won't be connected at Cagny.

Get them independent board with what would it take for it.

Yeah, I don't know yet.

Cost of globally.

Looking forward, our margins should be better than the once we do so because they don't do a lot.

And we've seen that effect.

Victor.

She knows what they're doing we would have a medication United Hello, I've enjoyed that and you'll get more if you're thinking about margins should be more like the ones. We saw in the.

Barstool.

Last Q2.

Yes indeed.

Sure.

Hello.

They know the modest gain or maintain it.

What are you up.

We can see it in that.

The business, that's lower margin increase there.

That'd be a wake in the United figures.

But that is going to consolidate.

Consolidated market.

Thank you and then the concrete business the high growth we've been seeing do you think it will continue into the second half and early part of next year or should we expect it to normalize from Huron. Thank you.

Yeah.

Good evening.

In the medical area.

But I hate to give him the benefit you got you.

Yes.

Thank God, the Congress business attached to them two people globally.

And he was talking about Gary you mentioned that maybe I guess I would appreciate it.

Can you give us a lot of me Wonder yesterday, you cannot get they'll maintain E gottschalk.

Gotcha.

But in the in the industry gets more professional lights.

Yeah.

Until then.

It should increase your participation.

Yeah.

Okay. Thank you.

Hello.

Yeah.

Thank you and this concludes our question and answer session I would like to turn the conference back over to Diego, how long for closing remarks.

Okay.

Thank you for joining us today, we truly appreciate your interest in noma.

We look forward to meet you again, you'll let school will remain available for any questions that you may come.

Thanks, again and have a nice day.

Yeah.

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

[music].

Yeah.

[music].