Q3 2023 Loma Negra Compañía Industrial Argentina SA Earnings Call
Speaker 1: Good morning and welcome to the Loma Negra third quarter 2023 conference call and webcast. All participants will be in listen only mode. Should you need assistance, please signify conference specialists by pressing the star key followed by zero. After today's presentation, there will be an
Good morning, and welcome to the Loma Negra third quarter, 'twenty twenty-three conference call and webcast all participants will be in listen only mode should you need assistance. Please signal a 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 Fishman will be responding in Spanish immediately followed by 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 conference over to Mr. Diego Hello.
Speaker 1: Also, Mr. Sergio Feifman will be responding in Spanish immediately followed by an English
Speaker 1: ask a question you may press star then one on your telephone keypad to withdraw your question.
Speaker 1: Please note that this event is being recorded. I would like now to turn the conference over to Mr. Diego Halon, head of investor relations. Please, Diego, go ahead.
<unk> head of Investor Relations. Please Diego go ahead.
Speaker 2: Thank you. Good morning and welcome to the Manegra's 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 closed.
Thank you.
Good morning, and welcome to <unk> earnings.
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.
Speaker 2: Joining me on the call this morning will be Sergio Fasman, our CEO and vice president of the World of Directors, and our CFO Marco Kradin. Both of them will be available for the Q&A session.
Joining me on the call. This morning will be central Bachman, our CEO and Vice President of the board of directors and our CFO Michael Kelly.
Both of them will be available for the Q&A session.
Speaker 2: Before we proceed, I would like to make the following safe harbor tape.
Before we proceed I would like to make the following safe Harbor statements.
Speaker 2: Today's call will contain forward-looking statements and I refer you to the forward-looking statement section of our earnings release and recent filing with the SES.
Today's call will contain forward looking statements and I refer you to the forward looking statements section.
Our earnings release, and recent filing with the FCC.
Speaker 2: We resume no obligation to update or revise any forward looking statements to reflect new or change events or circumstance.
Leisure assumes no obligation to update or revise any forward looking statements to reflect new or changed events or circumstances.
Speaker 2: This conference call will also include discussion on non- GAAP financial measures. The full reconciliation of the corresponding financial measures is included in the Erden's press release. Now I would like to turn the...
This conference call will also include discussion of non-GAAP financial measures.
For reconciliation of the corresponding financial measures is included in the earnings press release.
Now I would like to turn the call over to Sasha.
Speaker 3: Thank you, Diego. Hello everyone and thank you for showing us this.
Thank you Daniel Hello, everyone and thank to put showing us this morning.
Speaker 3: I would like to begin my presentation with a discussion of the highlights of the quarter. And then, Marcus, we thank you for our marker view and financial.
I would like to begin my presentation, we discussed some of the highlights of the quarter.
But of course, we take you well, we're not gonna view on peanuts.
Speaker 3: After that I will provide some final remarks and then we will open the culture quest.
I've said that I would provide some tightened them up.
Then we will open the call to questions.
Speaker 3: Starting with Light too. I am pleased to share the result of the third quarter with you today. The tendency for the volume of the Hindu trip persists in an intellectual period and the second day and third.
Starting with slide two.
Sure.
The third quarter with you today the tendency is for the body in the industry.
In the lithium PTO I'm disappointed the uncertainty.
Speaker 3: As we mentioned in the previous conference called Seventh Volume, all full lower compared to the last year, still show strong shibimin fuel.
As shown in the baby Sculpin at school cement volume was low.
Compared to the last year, it still shows throne she'd been puny.
Speaker 3: The high records from the last year set a challenging benchmark for the compilation. The volume reach in this period is the second best quarter of the history for the industry and the recent figures of October compare almost flat with the same period of 2020.
How do you think golf ball, but not yet at a challenging benchmark for the competition. The volume reach in this video is the second best quarter of the history for the industry I'm reticent to talk.
So that it can be almost flat with the same video plenty.
Speaker 3: As we navigate this election period and into economic challenging, both the same industry and Loma have demonstrated spirits.
As we navigate this.
It shouldn't PTO.
Challenging.
The <unk> and Loma.
How did the most of the Michigan.
Speaker 3: when we dive into the number, we see another robust quarter for Lomb.
When we dug into them, but we see another let's call it that from normal.
Speaker 3: where our top line reached 74 billion pesos, decreasing 8.3% primarily due to the volume contraction of our core cement.
Well what top line reached 74 billion pesos.
Eight 3%.
Eddie do you the boardroom contractual our cordless tenant tenant.
Speaker 3: despite this effect, every DI has 2 and 70 billion pesos with a margin expansion of 105 basic points and reaching a consolidated margin of 23.2%
Despite this effect EBITDA.
70 billion pesos with a much an expansion of one five basic bonds and reaching essentially they didn't matter.
93, 2%.
Speaker 3: Let's keep in mind the cell culture are the most challenged in terms of a BDI machine. You decisively impact of higher energy.
Yes keep in mind, the third quarter are the most challenged sheets Intel's EBITDA Mushing U the seasonal impact of higher.
Energy inputs and he says they're used to doing that EBITDA per ton to 76.5 going down for the quarter, 45% are both left yet.
Speaker 3: In recent, the US dollar, EBDI, portone, stood at $36.5 for the quarter, 4.5% above last year, for the quarter and stable in the second release.
I'll call it that.
In the six monthly basis.
Speaker 3: On the financial side, we use our class three domestic bond, receiving an alternative response for the market. It is an available ask to refinance cross-border debt that will be reducing our financial cost and extending the maturity will keep in a strong balance sheet with leverage ratio below one time.
On the financial side, we use our class three domestics ball, the television and sometimes a phone where the market is enabling us to address you close one of those beds seven you'll see our financial goals and extending the maturity.
Keeping a strong balance sheet with limited supply.
Below one times no fun.
Speaker 3: now, Juan, of the call to Marco Gradin, who will view through our Marker Review our financial share any assault! Please.
All she might go with that he who will walk you through our market have you seen that yet.
Police Medicals Lloyd.
Speaker 3: Thank you, Sergio. Good morning, everyone. Rest in peace.
Thank you Sergio and good morning, everyone. Please turn to slide four.
Speaker 3: As you can see on the upper left chart, the market expectation report from the central bank indicates a negative performance for the economy for 2023. Showing a decrease of two...
As you can see on the upper left chart.
The market expectation report from the Central Bank indicate that negative performance for the economy for 2020 free.
Showing a decrease of two 3%.
Speaker 4: where the results published by the deck show at least 5% for the second quarter.
The results published Baidu deck show, a decrease of almost 5% for the second quarter.
Speaker 4: In a context where the construction activity indicator shows a decline for the sector.
In a context of other construction activity indicators shows a decline for the sector.
Speaker 4: US investment fo
The National segment industry sales have demonstrated resilience.
Despite the five 6% decrease.
Speaker 4: This third water rank at the second best in history.
The third quarter ranked the second best in history.
Speaker 4: We've accumulated volume just 1.8 below the same period in 2020.
This is a cumulated volume just 1.8 below the same period in 2022.
Speaker 4: Furthermore, the rest of the figure publish for October indicates that the quenched recovered with volumes slightly below the ones reached in 2022. Backsemin
Furthermore, the rest of the field boundaries for October indicates a sequential recovery with volumes slightly do we know the ones, which each of us in 'twenty two.
But chairman maintained its tendency being the dispatch mode that is affected by the construction of the demand from the retail sector.
Speaker 4: being the dispatch mode that is affected by the construction of the demand from the retail sector.
Speaker 4: On the other hand, concrete producers remain at the primary driver of growth for the bulk mode.
The other fun concrete per user remains.
<unk> driver of growth called the bulk mode.
Speaker 4: In this sense, once in the breakdown by dispatch mode, barging fence now represents 44% of the total dispatches.
In defense when it seemed a breakdown by dispatch mode marching fence now represents 44% of the total budget.
Speaker 4: Pro 43% in the first quarter of 2022.
Got 43% in the first quarter of 2022.
Speaker 4: As we near the conclusion of a very challenging year, we foresee this rent for volume supers.
As we near the conclusion of a very challenging year.
We foresee the strengths for volumes to persist.
Speaker 4: We maintain a cautious optimistic that the resolution of the electoral process will alleviate volatility and pave the way for economic recovery.
We maintain a cautiously optimistic that a resolution of the electoral process.
With volatility and pave the way for economic recovery.
Speaker 4: Turning to slide 5 for overview of a top line performance by seg
Turning to slide five for a review of our top line performance by segment.
Speaker 4: The third quarter top line saw an 8.3% decrease, mainly attributed to declines in the cement segment followed by concrete and redwood, partially offset by the
The third quarter topline so on $8 three.
For sudden decrease mainly attributed to the glass in the semi segment, followed by concrete and railroad.
Partially offset by the performance of either of these.
Seven seven and that segment was down 12, 8%.
With bonus of attracting seven 1% year on year.
Mainly due to a decline in block seven service, coupled by softer pricing dynamic which.
Despite adjusting for inflation.
Experienced a decline owing to elevated marketing inflation figures and the timing of price adjustments.
Congress revenues decreased four 2% in the quarter volumes were down nine 4% of <unk>.
Set by a good pricing performance.
Some major projects, which are the market target for our concrete operations Honda based affected by the macroeconomic volatility.
I wouldn't get segment show an expansion of 17 five.
<unk>, 5%, which says volumes almost flat there.
Hey, good price performance boosted the top line.
On the other railroad revenues decreased four 5% in the quarter year on year.
Transported volumes were down four 2% affected by a decrease in just for the audience or aggregate, but Exxon.
While the price remained almost flat.
Despite the negative effect of the lower volume of production that they've got to be really affects the average price per ton.
As he said brown with longer average transported distance.
Moving onto slide seven consolidated gross profit for the quarter remained almost flat.
Showing a slight increase of 0.2% year over year with a margin expansion on that block on the 96 basis points to 23, 3%.
Mainly due to cost improvement in the 7000 megawatt Texas.
Regarding the SME segment, a decrease in energy inputs compensated the lower top line performance.
In the railroad segment, the lower cost was mainly driven.
By lower depreciations.
The margin expansion of the southern down very little segments was partially upset by constructions and computer neighborhoods, mainly due to cost pressures.
Finally, while SG&A expenses increased by one point to 8%.
As a percentage of revenues increased by 55 basis points.
Rising from seven 8% in the quarter.
2022 to eight 3%.
Please turn to slide eight our adjusted EBITDA for the quarter stood at $66 million down three 1% from the same quarter a year ago, reaching a very solid season.
<unk> adjusted EBITDA was down three 9% in the quarter, reaching $17 2 billion pesos with a consolidated EBITDA margin of 23, 2%.
Posting a year on year expansion of work around five basis point.
This is mainly attributable to improved margins in 17.
Seven and segment adjusted EBITDA margin stood at 26, 8% and.
Improving 252 basis points, mainly due to cost efficiencies.
That offset the lower top line performance.
Regarding costs, we saw a reduction of 9% in a per ton basis.
The primary reason for the call. This was a reduction in energy inputs.
Driven by increased utilization of natural gas in our thermal energy matrix.
Bye bye a lower price for this year.
Similarly, the cost of electrical energy is significantly decreasing as electrical generation take advantage of lower liquefied natural gas prices.
Additionally, by the end of the quarter, the new pipeline, you've got injection natural gas for a Buck I wanted that each of the transportation system.
I mean do you think the dependence of imported liquefied natural gas.
In a per ton basis, EBITDA reached $36 $5 per ton.
And four 5% from last year's third quarter.
Concrete adjusted EBITDA decreased by 128 million pesos compared to first quarter 'twenty to what a good breadth of four months wasn't able to compensate the lower volumes Unlike machine cost.
Margin contracted what kind of 79 basis points, reaching two 6%.
Okay.
Aggregates adjusted EBITDA decreased by 130 million pesos this quarter.
From 242 million pesos in the second quarter 'twenty two.
Reaching a margin of four 8%.
Finally, due to Congress, so costs that were partially offset by a positive price football.
Finally later with adjusted EBITDA reached 247 million pesos from negative 7 million pesos in the same period of 2022.
We have a margin of four point.
She 16%.
Mainly explained by cost improvements that offset a weaker top line.
Moving on to the bottom line on slide 10, this quarter, we posted a net profit attributable to owners of the company of seven 4 billion pesos.
Compared to a net loss of $28 9 billion pesos on third quarter 2022.
Mainly due to a lower total financial cost.
Total net financial cost stood at $1 6 billion peso this quarter from a total financial cost of $36 4 billion based on the same quarter last year.
Primarily due to the impact of the cancellation of dollar denominated debt with local funding that took place in the first quarter of 2022.
Moving onto the balance sheet as you can see on slide 11, we ended the quarter with a cash position of 24 9 billion pesos on the total debt.
<unk> $96 1 billion basis. Consequently, our net debt to EBITDA ratio stood at seven she wrote 97 times compared to <unk> 37 times at the industrial closing 22.
Our operating cash generation to that.
$14 6 billion pesos, but the decrease in the net profit adjusted was a noncash effects coupled with a lower positive effect of the working capital.
Mainly due to a lower tier decisions inventories are size of income tax.
Yeah.
Regarding capital expenditures, we allocated $4 4 billion pesos, while Stifel maintain this topics.
During the quarter the company used cash in financing activities.
19, 8 billion pesos, mainly due to the payment of stimulants announced.
Announced in late June.
Interest and the repayment of borrowings.
Partially compensated by the issuance of the glass through bond.
The net proceeds from borrowings.
In dollar terms our depth reach.
Reached $274 million.
Standing our net debt.
Just under $15 million at the end of this quarter.
Breaking it down by currency, there's other nominated debt represents 64% or so.
Total debt was arrested efficient basis.
Additionally, as mentioned before during the quarter the company issued its glass for your domestic bond intermediate to U S dollars for a total amount of $65 million.
With maturity in the first quarter of 2026.
And accruing an interest rate of 749% 30 year.
This issuance gave us the possibility to concept gross Florida.
Dollar denominated debt, reducing the financial cost and extending its maturity.
Now for our final remarks, I would like to handle the call back to search.
Thank you Marcos now you've seen the likes of different patients I. Please ask you to just like something.
To conclude.
I'd like to highlight a few key points.
We mentioned before we can see the continuity of the trends from the previous quarter, while the heme because people you don't.
I don't want to put all the wrinkles height of the last year.
The reduced economic activity.
We had a saturday right from the presidential election.
We are currently navigation immediately.
Certainly.
Economic and vitamins, we supposed to see near term challenges from decision making.
Yet cement volume remained solid although much weakness in question.
As the year draws to a close our confidence remained strong.
Even in these challenging and vitamins, Lola, which sort of thing.
And continuing to contribute to the industry the bill a bit from the our leadership position.
Okay.
I'd like to convey my compensation travel and employee cost them about Ethernet partners and the communities in which we operate them what do they continue to support.
He says about the continuous shortly.
Well the strong foundation, we could eat.
Got it.
And our prepared remarks, we are now ready to take questions.
Operator, please open the call for questions.
Thank you we will now conduct a question and answer session I would like to ask 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 is in the question queue. You May Press Star then two if you would like to remove your line for participants using speaker equipment. It.
It may be necessary to pick up your handset prior to pressing the keys once again star one on your telephone keypad we.
We also would like to ask that you. Please limit your questions to one question and one follow up. Please if you have additional questions you may re queue for those questions and they will be addressed also please note that Mr. Sergio Fishman will be responding in Spanish immediately followed by an English translation. Please hold momentarily, while we assemble our roster.
Our first question comes from Alexandra Oh Paragon of Morgan Stanley. Please go ahead.
Hi, Good morning said he'll medical's Diego, Thank you for the call.
My first question has to do with your energy matrix. So you did mention that you foresee some changes in the future. So if you could just talk about how do you see your energy mix evolving into 'twenty 'twenty four I understand that you have some long term contracts and some of your energy needs. But you also have a lot of moving parts for gas in the country and of course on top.
With that you have your decarbonisation targets. So if you can talk about how do you see that landing in 'twenty 'twenty, four and where do you see your energy cash cost going forward for the year that'd be very helpful.
Yeah.
Hi, Alejandro Thank you for your question.
He can give them all a concern.
And a lot of them are compared to a lot of time in Appalachia.
Alonso.
We accomplished to close some contracts below the prices that we close the deal before I will also come trouble coming.
But at some point you get a fine yes.
Some of those contracts are starting now in September and the airport two or three years term.
Absolutely I mean, you gotta make up at all.
Come up with a human coastal Mcdaniel.
Thanks Daniel.
And we got to the door and there she is talking about the industry metrics, we are expecting a decrease in the costs.
Costs epidural, they I didn't do my quarters that'd be helpful.
Even below the the numbers to figure itself out this.
This quarter's fucking up assembly.
It makes me at a minimum opinion, not a schulman and that the Ito.
Leanne and electrical energy he also had a reduced.
Cost and prices.
And I'm not a huge jump on them I think it'll be quite a bit of competitive connected and we are also foreseen a reduction in costs comparison.
With the cost of 20 of them to do.
Last week, I mean did better than we even thought.
And then I might have kept fully come back.
Basically for next year, we are foreseeing a too little.
To use or unnecessarily.
In natural gas.
That was very clear and if I have a chance for another question and this one is related to federal sued if I remember correctly your concession might come due next year. So if you can just remind us when is that being renewed in your view.
I think that that could be renewed under the same terms are given that we are seeing a change in administration that is there anything that we should expect there for next year. Thank you.
He put it.
Daniel modest one of them.
First of all so we shouldn't really expect it to end in March this year, a little yellow blah blah blah blah blah.
And we and the government with new concessions for 18 months.
Any more for lundell, when you're almost a longer one.
He doesn't think there might have been up quite a comedy.
And we're in conversations with the with the government regarding the characteristics of that.
The heat pumps that if it's going to be and open access scheme that the one day.
Okay.
Well see default.
You won't Miss it so and then the portable electronics to say, it's a bit of history.
At Lindbergh.
And due to the election process in the last couple of months. This process has been.
It's basically it's a little bit slower.
Okay.
So what.
What did you say very competitive as you understand it they're not tier one day.
Sure.
It feels like.
We expect this process to get them to keep up next year.
What are the actual concession is almost done and Oh boy.
Golar LNG commodity, hoping that you could get up to meet the $1 billion. Okay.
Yes, he was on Dominion.
Yep.
I'll be downloaded or beta in a month you may not think that the one just as a reminder, we did open up a scheme.
Yeah.
The government will.
Being charged off a big.
The infrastructure.
The operators are the ones that are going to.
Be careful there.
Hum.
Items.
Thank you that was very clear.
Hello.
Our next question comes from Bose Rigoni store from Latin Securities. Please go ahead.
Hi, Good morning, Thank you for the opportunity my.
My first question is.
What are your expectations for cement demand in 'twenty 'twenty, four and if you foresee any variation.
In demand contingent on which parts of your candidates queens the upcoming election.
Hi, Rodrigo Thank you Paul.
Now what I would almost seem to sound a little hot in trying to find a home in Vienna.
N.
We are working in our projections for next year, and then what I'm gonna wireline data well lumen that out but it was from one you know we don't give out any guidance.
The volumes for next year.
In the Permian demand can be adult Karina, we'll take cost out with having the quota you know praful, Chris Mcdonald could we end up coming to us even if you've got deal.
And regarding the election was or not.
Not much new friendships between the two candidates.
We've gotten really gotten volumes the bolthouse some processing bonds.
Could you a market boom to teradata, and but I do not know yet.
And if you had if you commotion bulk cannot go ta you're not.
Yeah, I didn't say language.
The video.
I'm, probably more he can probably to do expect is that there are some sudden changes I didn't even know you that might impact the volumes for the husky.
Yeah.
Okay. Thank.
Thank you and I have another question if I may.
In the in the current high inflation environment. How are you adjusting your pricing strategies to sustain the profitability and also maintaining your.
Your market share.
Yeah.
Okay.
What they said they can't but if you thought a lot about it or price strategy is linked to different factors.
Plus young people gone be always, especially when they got put into myeloma.
Inflation FX I know, we're all now or are you talking about inflation costs.
Medical had peripheral.
Nobody likes you got us bullish about them being nothing, but then T a number to that.
I don't know price dynamics or related to Boston and that.
And the competition.
Selling prices are like.
You know you've only got one did you do you want to get but I didnt quite get you got to think about like I said, I mean, all of it but I wonder woman meat and if it didn't go to Q&A.
I guess, you Gotta make comment on the competitive dynamic makes the.
It might get a chance to look slightly but you people are so mop.
So you can see.
Some more Neil moment contemplate having a flip it over to.
My imagine they've been able to confirm a few on the metallo board of healing.
From the last two months, we didn't cause them any any bad from the from the market by region on the California market.
You might even come out because she had just passed the border here.
We are not able to estimate the microchip or we shouldn't exactly.
And then he can talk about if you had to get their name on their multi cloud.
And I'm sure he won't get better you don't Wanna.
She had a kidney data.
By the wheel market intelligence, where we are able to do assume some it's more months than we used to make that to the market national market share. It's a it's ended up being one we have to play with it.
Okay that was really helpful. Thank you.
Yeah.
Oh.
The next question comes from Daniel Rojas from Bank of America. Please go ahead.
Good morning, gentlemen, thank you for taking my questions.
I'm going back to your first question regarding your energy matrix.
Very helpful to us too to understand how well the benefits youre seeing natural gas will translate into margin expansion I'm, hoping to drill down within a specific number but if you could give us a range of where you can see where we can see margins next year. It would be very helpful. And that's my first question.
How you're doing it so you get full of Portland.
T. A L impacting Latina go into 'twenty, one that are extremely costly and began calling on the fact that they can't really be glad ratios.
The the impact in our margin doesn't have to be it's not entirely about our cost efficiency, but also it's regarding our pricing strategy.
Critical eradicated.
And now.
I need that it won't be caught up or are you asking me.
But on the whole.
We'll have to keep in mind that we lost our investment.
And that money goes we do have a lot of efficiencies to be done with Wow.
Our production Glen depending on what other companies haven't let lending out money that might need either a limited sample, but I'm sure I'm glad that we were able to stabilize the production in the language with somebody and another number start making it even.
And then you brought to my property and whenever they need it.
It doesn't mean that if a buddy.
And for next year.
14.
<unk> seen that once you have them.
Okay could you remind us what the operational capacity you're running globally too.
No capacity that only the dealer body sort of confirm a phenomenal they seem committed to change that.
You have a clean cutoff.
Are they at capacity for the only tool we bought a.
One of our 5800 tons of clinker.
Oh, you're talking about a channel. So can you take me T and secondarily I'm talking about yeah. We are working all of them are sick.
It's about 10 six up to 200 tons a day. It's now 19, yet is what I'm trying to just get that anybody that's the commingle, it's aligned up $2 8 million tons a year.
Okay got it got it got it could've been shows how we believe we can reach a three 3 million.
Okay.
Thank you. Thank you for answering my questions.
Hello.
This concludes our question and answer session I would like to turn the conference back to Diego, how long for closing remarks.
Okay.
Thank you all for joining us today as always we really appreciate your interest in our company.
And remember that we don't mean touch or any questions that you may have thank you very much.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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No.
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Yeah.
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