Loma Negra Compañía Industrial Argentina Sociedad Anónima (LOMA) Q2 2025 Earnings Call Transcript

Loma Negra reported a challenging Q2 2025, with adjusted EBITDA declining 31% year-over-year to $34 million and consolidated EBITDA margin contracting 691 basis points to 21.2%. This was primarily driven by a softer pricing environment and increased competition as Argentina transitions to lower inflation, which offset an 11% increase in cement volumes and broader economic recovery signals from Q1 GDP growth. Revenue declined 8%, and net profit significantly decreased due to operational performance and reduced financial gains. Despite these pressures, the company maintained a solid balance sheet with net debt at $215 million (1.34x EBITDA) and successfully issued a $112.9 million corporate bond post-quarter to address upcoming maturities. Management anticipates double-digit volume growth for 2025 and expects pricing recovery in the second half, though significant impact from public works projects is projected for 2026.

Analysis

Loma Negra's Q2 2025 results reveal a significant disconnect between volume growth and profitability, highlighting severe margin compression. Despite an 11% year-over-year increase in cement volumes and a broader Argentine economic recovery (Q1 GDP +5.8%), consolidated revenue declined by 8%. The primary driver was a challenging pricing environment, which management attributes to intensified competition amid a transition to lower inflation. Consequently, adjusted EBITDA fell 31% in real terms to $34 million, and the consolidated EBITDA margin contracted by 691 basis points to 21.2%. The profitability pressure was acute across segments, with the core Cement segment's adjusted EBITDA margin falling to 24.8%, while the Concrete and Aggregates segments reported deeply negative margins of -13% and -27.3%, respectively. The company's net profit was nearly eliminated, falling to ARS 0.4 billion from ARS 41 billion, hurt by both weaker operations and a reduced financial gain from monetary positions as inflation moderated. On a positive note, the company maintains a solid balance sheet with a net debt-to-EBITDA ratio of 1.34x and proactively managed its debt profile by issuing a $112.9 million bond to extend maturities. While management reaffirms its outlook for double-digit volume growth in 2025 and expects a pricing recovery in the second half, they caution that major public works projects will likely not be a significant driver until 2026.

Key Decisions for Investors

• Investors should closely monitor the recovery of pricing power and EBITDA margins in the second half of 2025, as this is the critical catalyst for the stock, currently overshadowing the company's double-digit volume growth.
• It is prudent to temper near-term expectations, as management indicated that a significant impact from major public infrastructure projects is a 2026 event, leaving performance dependent on a gradual private sector recovery and modest provincial works.
• While the balance sheet remains solid with a manageable 1.34x net debt-to-EBITDA ratio, the sharp decline in profitability, negative cash from operations, and absence of dividends warrant a cautious stance until a clear inflection in margins is evident.