Loma Negra Reports 4Q23 Results

BUENOS AIRES, ARGENTINA / ACCESSWIRE / March 6, 2024 / Loma Negra, (NYSE:LOMA)(BYMA:LOMA), ("Loma Negra" or the "Company"), the leading cement producer in Argentina, today announced results for the three-month period ended December 31, 2023 (our "4Q23 Results").

FY23 Key Highlights

• Net revenues decreased 6.6% YoY to Ps. 422,161 million (US$ 790 million) mainly driven by the top line decrease in our core segment, Cement, while the positive performance of Concrete and Aggregates compensated the result of the Railroad segment.
• Consolidated Adjusted EBITDA reached Ps. 100,351 million, decreasing 25.7% YoY in adjusted pesos, while in dollars it reached 252 million, with a decrease of 12.7% YoY. The YoY comparison is affected by a non-core asset sale in 4Q22.
• Consolidated Adjusted EBITDA margin stood at 23.8%, contracting 610 basis points from 2022. Excluding the result of the asset sale in 2022, the contraction would have amounted to 378 basis points.
• Net income was Ps. 10,305 million, showing an increase of 70.7% YoY.
• During FY23, we distributed dividends for Ps. 39.4 billion (US$ 120 million), Ps. 67.53 per outstanding share (Ps. 337.63 per ADR).
• Loma Negra is presenting its third Sustainability Report for the fiscal year 2023, with the goal of sharing with all our stakeholders our journey and commitment to sustainable development.

4Q23 Key Highlights

• Net sales revenues decreased by 13.2% YoY to Ps. 99,398 million (US$ 182 million), mainly explained by a top line decrease in the Cement segment, with the other businesses following the same trend as our main segment.
• Consolidated Adjusted EBITDA reached Ps. 22,678 million, decreasing 44.7% YoY in adjusted pesos, while in dollars it reached 61 million, down 33.0% from 4Q22. Excluding the extraordinary result from the base of comparison, the decrease in pesos stood at 25.8%.
• The Consolidated Adjusted EBITDA margin stood at 22.8%, contracting 1,302 basis points YoY from 35.8%. Excluding the result of the asset sale in 2022, the contraction would have amounted to 389 basis points.
• Net Loss of Ps. 19,780 million, down from a gain of Ps. 22,746 million in the same period of the previous year, mainly explained by a higher financial cost.
• The Company issued its Class 4 of domestic bonds in the total principal amount of US$ 10.0 million, with an interest rate of 6% p.a. and with maturity in the second quarter of 2026.
• Net Debt stood at Ps. 140.636 million (US$ 174 million), representing a Net Debt/LTM Adjusted EBITDA ratio of 1.40x compared with 0.37x in FY22. Mainly due to the devaluation of the peso in December 2023.

The Company has presented certain financial figures, Table 1b and Table 11, in U.S. dollars and Pesos without giving effect to IAS 29. The Company has prepared all other financial information herein by applying IAS 29.

Commenting on the financial and operating performance for the fourth quarter of 2023, Sergio Faifman, Loma Negra's Chief Executive Officer, noted: "We have reached the end of a very challenging year for Argentina, where the construction industry has shown all its resilience, allowing me to present another solid year for LOMA.

Despite the lower volumes of the fourth quarter, affected by the lower level of activity due to the electoral period and the following change of administration, the industry showed strong adaptability to the economic environment and closed the year with the second-best dispatch volume in history, only behind the record reached in 2022.

We are very satisfied with the results achieved in these challenging conditions, ratifying the position of leadership of LOMA, fulfilling our role as key players of the industry in Argentina, being close to our clients, suppliers, and other stakeholders. Working together, we can address the challenges our country faces, confident in our ability to bolster its growth potential once a less volatile environment is achieved.

Also, with great satisfaction, we publish a new edition of Loma Negra's Sustainability Report to share with all our stakeholders our work and commitment to sustainable development. We are continuously evolving and progressing towards becoming a company dedicated to addressing the challenges and demands of our environment. It is a path we traverse with responsibility. This sustainability report mirrors our journey. I encourage you to read it to discover the most noteworthy achievements of our company."

Sales Volumes

Sales volumes of Cement, masonry, and lime during 4Q23 decreased by 10.1% to 1.5 million tons. Even though the lower volume was across both dispatch modes, the bulk mode of dispatch was impacted by the political transition and the economic environment, especially in the last month of the period. The bagged cement showed a more moderate decrease, following the trend of the previous quarters.

In terms of the volume of the Concrete segment, it exhibited a decrease of 17.5% YoY. Projects carried out by the private sector began the quarter at a promising pace but experienced a slowdown in December. Conversely, public sector works were significantly impacted by the transition in the national administration and the prevailing political context. Similarly, volumes for the Aggregates segment declined by 12.3%

The volumes of the Railway segment experienced a contraction of 9.0% compared to the same quarter of 2022. The lower level of activity in the construction sector impacted our main cargo shippers, especially in Aggregates. Additionally, the storm that hit Bahía Blanca in December temporarily knocked out of service the two plants from which we transport chemicals.

For fiscal year 2023, our main segment, Cement, masonry and lime, registered a year-on-year decrease of 4.5%, mainly explained by the soft dynamic of the economy in the second semester, affected by the election process. The bagged cement was more impacted by this environment, partially compensated by bulk dispatches, that ended the year in positive figures, primarily for the performance during the first half of the year.

The Concrete segment ended the year almost flattish with an increase of 0.2%, while the Aggregates segments was up 3.9% YoY. Concrete demand was one of the principal drivers of the growth in bulk cement shipments, dispatch mode that ended the year with positive growth figures, primarily on the back of the volumes posted in the first half of the year.

The volume of the Railroad segment experienced a decrease of 7.5%, primarily attributed to lower transported volumes of construction materials and fracsand. The transportation market in 2023 was characterized by being affected by the poor harvest due to the strong drought, which caused grain trucks to shift to other sectors, affecting our main transportation flows, specifically for construction materials.

Review of Financial Results

Net Revenues

Net revenue decreased 13.2% to Ps. 99,398 million in 4Q23, from Ps. 114,483 million in the comparable quarter last year, with a decline across all segments, being more moderate in the Aggregates and Railroad segments.

The cement, masonry cement, and lime segment was down 16.0% YoY, with volumes contracting by 10.1%, the bulk mode of dispatch was impacted by political transition and the economic environment, especially in the last month of the period. The bagged cement showed a more moderate decrease, following the trend of the previous quarters. Additionally, this effect was coupled with a softer price dynamic that, despite moving with inflation, showed a decrease due to higher monthly inflation figures and the timing of price adjustments.

Concrete registered a decrease in its topline of 20.3% compared to 4Q22, primarily due to lower volumes, which were down by 17.5%. The Aggregates segment posted a decrease in revenues of 9.5%, where the positive price performance partially offset the lower volume.

Railroad revenues decreased by 10.5% in 4Q23 compared to the same quarter of 2022, primarily due to a lower transported volume, which decreased by 9.0% in the quarter, mainly affected by the decrease in transported volumes of aggregates.

For fiscal year 2023, net revenue decreased by 6.6% to Ps. 422,161 million from Ps. 451,954 million in fiscal year 2022, primarily due to lower topline performance of our core business, Cement, followed by the Railroad segment. This was partially offset by a better performance of Concrete and Aggregates.

Cost of sales, and Gross profit

Cost of sales decreased by 12.8% YoY, reaching Ps. 73,379 million in 4Q23, mainly due to the decrease in sales volumes across all segments and the lower impact of depreciations in the Cement and Railroad segments. Regarding the cost of sales for Cement, the segment posted a decrease of 7.0% on a per-ton basis. The main reason for this was the reduction in energy inputs, primarily driven by lower consumption of thermal energy per ton, coupled with a decrease in natural gas prices. Similarly, the cost of electrical energy improved as the proportion of hydraulic energy, which has a lower cost, increased in the country's electrical generation matrix. Additionally, there was lower depreciation than that registered in 4Q22.

Gross Profit decreased 14.3% YoY to Ps. 26,018 million in 4Q23, from Ps. 30,375 million in 4Q22, with a gross profit margin contraction of only 36 basis points YoY to 26.2%.

During fiscal year 2023, Gross Profit decreased 13.2% to Ps. 105,907 million with a gross profit margin contracting 192 basis points to 25.1%.

Selling and Administrative Expenses

Selling and administrative expenses (SG&A) in 4Q23 remained flat, with a variation of only -0.1% YoY to Ps. 9,959 million, from Ps. 9,965 million in 4Q22. As a percentage of sales, SG&A showed an increase against 4Q22 of 132 basis points, reaching 10.0% due to the decrease in the top line.

During fiscal year 2023, SG&A decreased by 0.8% compared with the previous year, and as a percentage of sales stood at 9.2%, increasing 54 bps.

Adjusted EBITDA & Margin

Adjusted EBITDA decreased 44.7% YoY in the fourth quarter of 2023 to Ps. 22,678 million from Ps. 41,021 million in the same period of the previous year, mainly affected by lower adjusted EBITDA generated by our cement business, also followed by the other businesses.

Likewise, the Adjusted EBITDA margin contracted 1,302 basis points to 22.8% compared to 35.8% in 4Q22. The sale of a non-core asset in 4Q23 affected the base of comparison, and accounts for 913 basis points. Excluding this effect, the margin contracted 389 basis points, with margins decreasing across all segments.

In particular, the Adjusted EBITDA margin of the Cement, Masonry and Lime segment contracted 1,254 bps to 26.6%. Excluding the previously mention asset sale from the base of comparison, the margin contracted 217 bps. Prices, despite being adjusted by inflation, decreased when compared with 4Q22 due to high monthly inflation figures and the timing of the price adjustments. The lower top line performance was partially offset by efficient cost management driven by improved energy inputs.

Concrete Adjusted EBITDA margin contracted 121 bps, and stood at 1.5%, from 2.7% in 4Q22. Despite the cost and expenses controls, it couldn't fully offset the lower top line.

The Adjusted EBITDA margin of Aggregates contracted to 14.2%, from 25.9% in 4Q22, mainly due to higher sales costs and the effect of lower volumes, partially compensated by a positive price performance.

Finally, the Adjusted EBITDA margin of the Railroad segment contracted 922 bps to -4.2% in the fourth quarter, from 5.1% in 4Q22, principally due to higher costs, coupled with lower transported volumes.

During FY23, Adjusted EBITDA decreased 25.7% reaching Ps. 100,351 million from Ps. 134,981 million in FY22, with an Adjusted EBITDA margin compression of 610 basis points, from 29.9% in 2022 to 23.8% in 2023. Excluding the sale of the non-core asset of the base of comparison, the Adjusted EBITDA decreased 19.4%, contracting 378 basis points.

Finance Costs-Net

During 4Q23, the Company reported a total Net Financial Cost of Ps. 37.3 billion compared to a total net financial gain of Ps. 1.2 billion in 4Q22, mainly due to the impact in of the devaluation of the peso in exchange rate differences, partially offset by a gain in the net monetary position. In the same sense, we had an increase in the financial expense due to the higher debt position.

During FY 2023, the Company recorded a total net financial cost of Ps. 46.1 billion, compared to a net financial cost of Ps. 54.8 billion in 2022.

Net Profit and Net Profit Attributable to Owners of the Company

Net loss of Ps. 20,188 million in 4Q23 compared to a net profit of Ps. 23,207 million in the same period of the previous year. The higher total financial cost due to the devaluation, along with the sale of the non-core asset in 4Q22, are the principal reasons for the variation.

Net Loss Attributable to Owners of the Company stood at Ps. 19,780 million. During the quarter, the Company reported a loss per common share of Ps. 33.9003 and an ADR loss of Ps. 169.5014, compared to a gain per common share of Ps. 38.9166 and a gain per ADR of Ps. 194.5830 in 4Q22.

During fiscal year 2023, Net Income Attributable to Owners of the Company increased 70.7% YoY, to Ps. 10,305 million, from Ps. 6,037 million in fiscal year 2022, mainly as a result of a lower total net financial cost coupled with a lower tax position thar compensated a lower operational result.

Capitalization

As of December 31, 2023, total Cash, Cash Equivalents, and Investments were Ps. 6,734 million compared with Ps. 15,293 million as of December 31, 2022. Total debt at the close of the quarter stood at Ps. 147,370 million, composed by Ps. 37,225 million in short-term borrowings, including the current portion of long-term borrowings (or 25% of total borrowings), and Ps. 110,146 million in long-term borrowings (or 75% of total borrowings).

At the close of the fourth quarter of 2023, 76% (or Ps. 111,359 million) of Loma Negra's total debt was denominated in U.S. dollars, and 24% (or Ps. 36,011 million) was in Pesos.

As of December 31, 2023, 24% of the Company's consolidated loans accrued interest at a variable rate and accrued interest based on BADLAR, as it is debt in pesos. The remaining 76% accrues interest at a fixed rate in foreign currency.

In the quarter the company issued a domestic bond in the total principal amount of US$ 10.0 million with maturity in 2Q26. Additionally, the company cancelled all remaining cross-border, US dollar short-term debt, extending the average duration of Loma Negra's total debt to 1.7 years.

The Net Debt to Adjusted EBITDA (LTM) ratio increased to 1.40x as of December 31, 2023, from 0.37x as of December 31, 2022, as a result of an increase in the debt position primarily due to the devaluation of the peso.

Cash Flows

In 4Q23, our operating cash generation stood at Ps. 26,194 million, compared to Ps. 35,035 million in the same period of the previous year, where the decrease in the net profit adjusted to reconcile to net cash provided by operating activities was partially compensated by a positive effect of the working capital, mainly due to lower income tax advances.

During 4Q23, the Company used cash in financing activities for Ps. 31,506 million, mainly for the repayment of borrowings, and interests. We also issued the Class 4 bond that, along with short term borrowings, partially offset these effects. Regarding cash used in investing activities, The Company used a total of Ps. 18,200 million, primarily for maintenance capex and the ongoing project of adapting our dispatch facilities to use 25kg bags.

During fiscal year 2023, the Company made capital investments for a total of Ps. 35,898 million. The cash flow generated by operating activities was Ps. 85,030 million compared to Ps. 97,664 million in FY 2022, and net cash used in financial activities for Ps. 41,086 million compared to Ps. 77,172 million the previous year, mainly explained by the increase in the debt position.

Domestic Bond Issuance

On November 2, 2023, the Company issued its Class 4 of domestic bonds in the total principal amount of US$ 10.0 million. Terms of the issue are as outlined below.