Loma Negra Does Not Deserve To Trade At 15x Cycle-Average Earnings

Loma Negra reported 4Q25 EBITDA margin down over 900 bps YoY to ~20%, with cement-segment EBITDA margin sliding 15 percentage points to 23%, driven by weak construction demand and pricing pressure. Early 2026 industry data remain soft, pointing to a prolonged normalization and delayed recovery in Argentina's construction sector and retail demand. Expect continued margin pressure and downside risk to near-term earnings and sector exposure.

Analysis

The immediate read-through is that Argentina-driven cement demand softness will compress utilization and push producers into price competition; that dynamic favors rivals with diversified geographies (ability to absorb Argentine oversupply via exports) and hurts local contractors, aggregates, rebar and ready-mix suppliers through cascading margin pressure. Expect a two‑stage market: an initial inventory destock and spot-volume grab (weeks–months) followed by selective kiln curtailments and maintenance deferrals that can materially tighten physical supply if weakness persists beyond 6–9 months.

FX and input-cost mismatches are the hidden amplifiers. Firms with USD‑linked fuel/parts or high imported-capital goods will see margins reprice faster than peers with locally sourced inputs — so a further peso depreciation or international fuel price spike could paradoxically accelerate margin divergence within the sector in 1–3 months. Conversely, decisive public capex awards or mortgage rate relief would show up quickly in private-sector starts and would likely reflate volumes within 3–9 months, making policy the highest‑leverage catalyst.

Second‑order winners include regional exporters of clinker/finished cement with spare port/logistics capacity and equipment lessors who can pick up distressed fleet leases; losers beyond the obvious cement maker are construction subcontractors, transport/logistics firms, and local steel rebar producers where demand is more elastic. Liquidity/credit stress among smaller contractors is a make‑or‑break near‑term risk that could convert a demand shock into longer term market consolidation, creating cyclical M&A opportunities over 12–24 months.

Consensus appears to price a long, deep trough; that may be overstated if producers respond with rapid capacity rationalization or if the government steps in with targeted infra spend. Use option structures or relative-value pairs to capture either a continued downside (next 3–9 months) or a sharp policy-led rebound (6–12 months) — outright single‑name directional exposure is high‑beta and should be sized accordingly.

Key Decisions for Investors

• Short LOMA (LOMA) equity — initiate 1.5% NAV exposure, 3–9 month horizon. Target 30–40% downside if pricing/volumes continue to normalize; set hard stop at 12–15% adverse move. Rationale: Argentina‑specific demand shock with limited near‑term catalysts.
• Pair trade: Short LOMA / Long Holcim ADR (HCMLY) equal notional — 1–2% NAV, 3–12 month horizon. Isolates Argentine operational risk while keeping sector exposure; close if spread compresses by >10% vs entry.
• Buy protective put spread on LOMA (9–12 month expiry) — size 0.5% NAV. Use a cost‑efficient debit spread to cap premium while retaining asymmetric downside if margins deteriorate further; max loss = premium, upside to strike width.
• Event‑leveraged long: On clear signs of government infra awards or mortgage relief (trigger: announced plan within budget cycle), rotate 50% of short LOMA exposure into long HCMLY or CX (CEMEX) for 6–12 months to play regional reallocation and commercial rebound — expect 2–3x recovery on position if policy materializes.