Loma Negra Reports 4Q18 and FY18 Results

BUENOS AIRES, , Argentina–(BUSINESS WIRE)–Loma Negra, (NYSE: LOMA)(BYMA: LOMA), (“Loma Negra” or the
“Company”), the leading cement producer in Argentina, today announced
results for the three and twelve-month periods ended December 31, 2018
(our “4Q18 and FY18 Results”).

Commencing with our in 4Q18 and FY18 Results, the Company is reporting
results of its subsidiaries by applying International Accounting
Standards 29 – IAS 29 (Financial Reporting in Hyperinflationary
Economies) (“IAS 29”), as detailed in the “Review of Financial Results”
on page 8.

4Q18 Key Highlights

  • Net revenue increased 2.8% YoY to Ps.6,936 million (US$182 million),
    mainly reflecting growth in Cement in Paraguay and the Concrete segment
  • Consolidated Adjusted EBITDA up 20.6% YoY to Ps.2,159 million (US$58
    million), principally driven by the Cement, masonry, and lime segment
    in Argentina, further supported by growth across all other segments
  • Consolidated Adjusted EBITDA margin expanded by 459 basis points YoY
    from 26.5% to 31.1%
  • Excluding the application of IAS 29 the Consolidated Adjusted EBITDA
    margin expanded 496 basis points YoY from 26.9% to 31.9%
  • Net Debt /LTM Adjusted EBITDA ratio of 0.43x from 0.28x in FY17

FY18 Key Highlights

  • Net revenue up 7.9% YoY to Ps.26,807 million (US$789 million) mainly
    supported by a favorable pricing environment in Argentina
  • Consolidated Adjusted EBITDA rose 14.5% YoY to Ps.7,121 million
    (US$220 million) and Adjusted EBITDA margin expanded 153 basis points
    to 26.6%

The company has presented certain financial figures Table 1b and Table
11 below in U.S. dollars and Pesos without giving effect to IAS 29. The
company has prepared all other all other financial information herein by
applying IAS 291.

Commenting on the financial and operating performance for the fourth
quarter of 2018, Sergio Faifman, Loma Negra’s Chief Executive Officer,
noted
: “We closed the year with another solid quarter, despite
the challenging macro-economy environment in Argentina. Specifically,
our core Argentine Cement business, delivered both Adjusted EBITDA
growth and margin expansion, even with weaker volume demand in the
country. We are also pleased to see that our concrete operations
continued to deliver strong results, reaching record quarterly and
annual volumes.

“Consolidated Adjusted EBITDA margin increased by 459 basis
points year-on-year, supported by the good performance in our core
Cement businesses in Argentina and Paraguay, as well as in our Concrete
business.

“During 2018 cement demand in Argentina turned much weaker in the
second half of the year resulting in a 2.6% year-on-year decline for the
year as a whole. Looking into 2019, we expect the negative cycle that
started in the second quarter of 2018 to turnaround by mid-year
following expectations of overall economic recovery in the country. We
remain focused on balancing growth and profitability while leveraging
our leadership position

“The expansion in L´Amalí plant continues to be a key element of our
long-term growth strategy, as it will let us optimize our production
footprint while provide much needed capacity for when demand recovers.”

1) Table 1b and Table 11– Figures in US dollars
result from the calculation of figures expressed in Argentine pesos and
the average exchange rate for each reporting period (2018 figures
exclude the impact of IAS 29 and 2017 figures are as previously reported)

Table 1: Financial Highlights
(amounts expressed in millions of pesos, unless otherwise noted)
 
  Three-months ended
December 31,
  Twelve-months ended
December 31,
    2018   2017   % Chg.   2018   2017   % Chg.
Net revenue   6,936   6,747   2.8% 26,807   24,839   7.9%
Gross Profit   2,045   1,807   13.2% 6,824   6,329   7.8%
Gross Profit margin   29.5%   26.8%   +270 bps 25.5%   25.5%   -2 bps
Adjusted EBITDA   2,159   1,790   20.6% 7,121   6,218   14.5%
Adjusted EBITDA Mg.   31.1%   26.5%   +459 bps 26.6%   25.0%   +153 bps
Net Profit   1,265   1,712   -26.1% 1,951   3,678   -47.0%
Net Profit attributable to owners of the Company   1,193   1,670   -28.5% 1,800   3,510   -48.7%
EPS   2.0016   2.9240   -31.5% 3.0198   6.1464   -50.9%
Shares outstanding at eop   596   596   0.0% 596   596   0.0%
Net Debt   3,061   1,748   75.1% 3,061   1,748   75.1%
Net Debt /LTM Adjusted EBITDA   0.43x   0.28x   0.15x 0.43x   0.28x   0.15x
 

Table 1b: Financial Highlights in Ps and in U.S. dollars (2018
figures exclude the impact of IAS 29 and 2017 figures are as
previously reported)

 
In million Ps. Three-months ended
December 31,
  Twelve-months ended
December 31,
    2018   2017 % Chg. 2018   2017   % Chg.
Net revenue   6,741   4,452 51.4% 22,163   15,287   45.0%
Adjusted EBITDA   2,149   1,199 79.3% 6,167   3,942   56.4%
Adjusted EBITDA Mg.   31.9%   26.9% +496 bps 27.8%   25.8%   +204 bps
Net Profit   1,324   692 91.2% 2,169   1,700   27.5%
Net Debt   3,061   1,184 158.5% 3,061   1,184   158.5%
Net Debt /LTM Adjusted EBITDA   0.50x   0.30x 0.20x 0.50x   0.30x   0.20x
     
In million US$ Three-months ended
December 31,
Twelve-months ended
December 31,
    2018   2017 % Chg. 2018   2017   % Chg.
Ps./US$, av   37.14   17.56 111.5% 28.09   16.56   69.6%
Ps./US$, eop   37.81   18.88 100.3% 37.81   18.88   100.3%
Net revenue   182   254 -28.4% 789   923   -14.5%
Adjusted EBITDA   58   68 -15.2% 220   238   -7.8%
Adjusted EBITDA Mg.   31.9%   26.9% +496 bps 27.8%   25.8%   +204 bps
Net Profit   36   39 -9.6% 77   103   -24.8%
Net Debt   81   63 29.1% 81   63   29.1%
Net Debt /LTM Adjusted EBITDA   0.50x   0.30x 0.20x 0.50x   0.30x   0.20x
 

Overview of Operations

Sales Volumes

Table 2: Sales Volumes2
             
Three-months ended
December 31,
Twelve-months ended
December 31,
        2018   2017   % Chg.   2018   2017   % Chg.
Cement, masonry & lime
Argentina MM Tn 1.44 1.76 -18.4% 6.12 6.42 -4.7%
Paraguay   MM Tn   0.15   0.13   12.6% 0.57   0.57   -0.4%
Cement, masonry & lime total       1.58   1.89   -16.3% 6.68   6.99   -4.3%
Argentina:
Concrete MM m3 0.27 0.24 13.6% 1.07 0.82 30.0%
Railroad MM Tn 1.21 1.29 -6.6% 4.75 4.98 -4.6%
Aggregates   MM Tn   0.30   0.28   9.0%   1.09   1.07   1.6%
2 Sales volumes include inter-segment sales
 

Sales volumes of cement, masonry and lime in Argentina during 4Q18
declined 18.4% to 1.44 million tons mainly impacted by soft demand and
adverse weather conditions. In Paraguay, sales volumes increased 12.6%
in fourth quarter to 0.15 million tons, beating industry performance. As
a result, consolidated total sales volumes of cement, masonry and lime
for the quarter decreased 16.3% YoY to 1.58 million tons.

Sales volumes in the Concrete segment in Argentina were up 13.6% YoY to
0.27 million m3 reaching a new record high during 4Q18
benefitting from continued activity in public infrastructure projects,
principally in the metropolitan area of Buenos Aires.

Aggregate volumes in 4Q18 increased 9.0% YoY to 0.30 million tons mainly
due higher dispatches to the concrete segment reaching a record high in
October. By contrast, Railroad segment volumes experienced a 6.6%
decline versus the comparable quarter in 2017, affected by lower cement
and aggregates demand, partially compensated by a higher fracsand
volumes.

For FY18, Loma Negra reported a 4.3% YoY decline in total Cement,
masonry and lime sales volumes mainly reflecting overall weak market
demand in Argentina, while in Paraguay volumes remained relatively flat.
Concrete volumes experienced a 30% YoY increase, reaching the record of
1.07 MMm3, and aggregates ended the year with a slight increase of 1.6%
compared to FY 2017. Railroad segment volumes fell 4.6% in 2018
principally reflecting the slowdown in building materials transportation.

Review of Financial Results

Following the categorization of Argentina as a country with a three-year
cumulative inflation rate greater than 100%, the country is considered
highly inflationary in accordance with IFRS. Consequently, starting July
1, 2018, the Company is reporting results applying IFRS rule IAS 29. IAS
29 requires that results of operations in hyperinflationary economies
are reported as if these economies were highly inflationary as of
January 1, 2018, and thus year-to-date, together with comparable
results, should be restated adjusting for the change in general
purchasing power of the local currency, using official indices.

Table 3: Consolidated Statement of Financial Position
(amounts expressed in millions of pesos, unless otherwise noted)
 
  Three-months ended
December 31,
  Twelve-months ended
December 31,
    2018   2017   % Chg. 2018   2017   % Chg.
Net revenue 6,936   6,747   2.8% 26,807   24,839   7.9%
Cost of sales   (4,891)   (4,939)   -1.0% (19,983)   (18,510)   8.0%
Gross Profit   2,045   1,807   13.2% 6,824   6,329   7.8%
Selling and administrative expenses (486) (528) -8.0% (1,934) (1,969) -1.8%
Other gains and losses 91 121 -24.9% 109 116 -6.1%
Tax on debits and credits to bank accounts (56) (89) -36.9% (254) (305) -16.6%
Finance costs, net
Exchange rate differences 317 (388) -181.7% (1,242) (124) 898.1%
Financial income 95 29 228.0% 27 28 -4.8%
Financial expenses (226) (82) 176.6% (661) (518) 27.8%
Gain on net monetary position   42   115   -63.7% 214   342   -37.6%
Profit before taxes   1,822   985   85.0% 3,083   3,900   -21.0%
Income tax expense
Current (521) (292) 78.5% (1,049) (1,062) -1.2%
Deferred   (35)   1,019   -103.5% (83)   841   -109.8%
Net profit   1,265   1,712   -26.1% 1,951   3,678   -47.0%
Net majority income   1,193   1,670   -28.5% 1,800   3,510   -48.7%
 

Net Revenues

Net revenue increased 2.8% to Ps.6,936 million in 4Q18, from
Ps.6.747 million in the comparable quarter last year, mainly due to
strong growth in Concrete and Cement in Paraguay, further supported by
the Aggregates segment.

Revenues in Cement, masonry and lime revenues in Argentina were down
5.9% YoY amid the volume drop and despite the favorable price
environment. Cement revenues in Paraguay increased 57.0% YoY, driven by
the recovery in sales volumes coupled with the Paraguayan Guarani
appreciation against the Argentine peso.

Continued growth in record high volumes and higher prices, Concrete
revenues rose 24.6% YoY. By contrast, Railroad revenues decreased 2.5%
YoY, as price increase did not offset sales volume drop. Aggregate
revenues were up 19.8% YoY during the period, driven by volume increase
as well as favorable pricing dynamics.

For FY18, net revenues increased 7.9% to Ps.26,807 million from Ps.
24,839 in the FY17, mainly due to revenues growth in Cement, masonry
Cement, and lime in Argentina and Paraguay, together with the Concrete
segment.

Cost of sales, and Gross profit

Cost of sales decreased 1.0% YoY reaching Ps.4,891 million in
4Q18, principally reflecting the impact of the peso depreciation on the
Company’s cost structure, mainly in thermal and electricity costs. The
increment in Cost of Sales was partially offset mainly by the lower
volume sold in the Cement, masonry and lime segment in Argentina.

Gross profit rose 13.2% YoY to Ps.2,045 million in 4Q18
from Ps.1,807 million in 4Q17, with gross profit margin expanding 270
basis points YoY to 29.5%.

During FY18, gross profit increased 7.8% to Ps.6,824 million with gross
profit margin remaining stable at 25.5%

Selling and Administrative Expenses

Selling and administrative expenses (SG&A) in 4Q18 decreased 8.0%
YoY to Ps.486 million, from Ps.528 million in 4Q17. As a percentage of
revenues, SG&A declined 82 basis points to 7.0% in 4Q18, from 7.8% in
4Q17 principally due to cost management along with a reduction in the
effective sales tax rate.

During FY18, SG&A fell 1.8% in absolute values from the year-ago levels,
and as a percentage of sales contracted by 71 basis points to 7.2%, from
7.9% in FY17.

Adjusted EBITDA & Margin

Table 4: Adjusted EBITDA Reconciliation & Margin
(amounts expressed in millions of pesos, unless otherwise noted)
 
  Three-months ended
December 31,
  Twelve-months ended
December 31,
    2018   2017   %Chg. 2018   2017   %Chg.
Adjusted EBITDA reconciliation:        
Net profit 1,265 1,712 -26.1% 1,951 3,678 -47.0%
(+) Depreciation and amortization 509 390 30.4% 2,121 1,742 21.8%
(+) Tax on debits and credits to bank accounts 56 89 -36.9% 254 305 -16.6%
(+) Income tax expense 556 (727) -176.5% 1,132 222 410.0%
(+) Financial interest, net 92 62 48.7% 508 412 23.4%
(+) Exchange rate differences, net (317) 388 -181.7% 1,242 124 898.1%
(+) Other financial expenses, net 39 (9) -542.1% 127 78 63.1%
(+) Gain on net monetary position   (42)   (115)   -63.7% (214)   (342)   -37.6%
Adjusted EBITDA 2,159 1,790 20.6% 7,121 6,218 14.5%
Adjusted EBITDA Margin   31.1%   26.5%   +459bps 26.6%   25.0%   +153bps
 

Adjusted EBITDA increased 20.6% YoY in the fourth quarter of 2018
to Ps.2,159 million, with Adjusted EBITDA margin expanding 459 basis
points to 31.1% compared to 26.5% in 4Q17.

As previously reported, excluding the application of IAS 29, as shown on
Tables 1b, Adjusted EBITDA in Ps. increased 79.3% YoY in the fourth
quarter of 2018, mainly driven by the Cement segments in Argentina and
Paraguay, with Adjusted EBITDA margin expanding 496 basis points to
31.9% compared to 26.9% in 4Q17.

Table 11, presenting financial Data by Segment as previously reported
(Excluding IAS 29), shows that Adjusted EBITDA for the Cement segment in
Argentina increased during the fourth quarter 69.2% YoY and the margin
expanded by 554 basis points to 34.6%. The Cement segment in Paraguay,
reported a 119.8% YoY increase in Adjusted EBITDA while Adjusted EBITDA
margin was 40.3%, remaining almost flat compared to the same period one
year ago. In addition, the Concrete segment reported an increase of
Ps.43 million in Adjusted EBITDA reaching Ps.66 million, with the margin
expanding 216 basis points mainly as a result of higher sales volumes.
Adjusted EBITDA for the Railroad segment increased 84.2%% in the fourth
quarter of 2018, and the Adjusted EBITDA margin continued to expand
during the quarter to 17.1% from 13.4% in the comparable period in 2017
benefitting higher revenues and lower fixed costs.

During FY18, Adjusted EBITDA increased 14.5% reaching Ps.7,121 million
from Ps.6,218 million in FY17, with an Adjusted EBITDA margin expansion
of 153 basis points, from 25.0% in 2017 to 26.6% in 2018.

Finance Costs-Net

Table 5: Finance Costs, net
(amounts expressed in millions of pesos, unless otherwise noted)
 
  Three-months ended
December 31,
  Twelve-months ended
December 31,
    2018   2017   % Chg.   2018   2017   % Chg.
Exchange rate differences 317   (388)   -181.7% (1,242)   (124)   898.1%
Financial income 95 29 228.0% 27 28 -4.8%
Financial expenses (226) (82) 176.6% (661) (518) 27.8%
Gain on net monetary position   42   115   -63.7%   214   342   -37.6%
Total Finance Costs, Net   228   (327)   -169.8%   (1,663)   (271)   512.6%
 

During 4Q18, the Company reported a gain of Ps.228 million in total
finance costs-net compared to a loss of Ps.327 million in the previous
year fourth quarter, mainly due to the gain in foreign exchange
differences resulting from the peso appreciation in the period.

Net Financial expense increased by Ps.144 million as a result of higher
interest rates.

During FY18, total finance costs, net increased Ps.1,391 million to Ps.
1,663 million from Ps.271 million in FY17, mainly as a result of a
higher foreign exchange loss due to the sharp peso depreciation
experienced during the period.

Net Profit and Net Profit Attributable to Owners of the Company

Net Profit for 4Q18, decreased 26.1% to Ps.1,265 million from
Ps.1,712 million in the corresponding quarter of the previous year. The
effective tax rate increased to 30.5% in 4Q18 from -73.8% in the
year-ago period. During the fourth quarter of 2017, deferred income tax
provision was adjusted downward as a result of the tax rate reduction
from the Tax Reform enacted on December 2017.

Net Profit Attributable to Owners of the Company declined 28.5%
YoY, or Ps.477 million, to Ps.1,193 million in 4Q18. During the quarter,
the Company reported earnings per common share of Ps.2.0016 and earnings
per ADR of Ps.10.0079, compared with earnings per share of Ps.2.9240 and
earnings per ADR of Ps.14.6199 in 4Q17. Additionally, this year net
profit was also negatively impacted by foreign exchange losses when
compared to previous one.

During FY18, Net Profit attributable to owners of the Company decreased
48.7% YoY, to Ps.1,800 million, from Ps.3,510 million in FY17.

Capitalization

Table 6: Capitalization and Debt Ratio
(amounts expressed in millions of pesos, unless otherwise noted)
 
  As of December 31,
    2018   2017
 
Total Debt 5,963 6,443
– Short-Term Debt 3,355 2,598
– Long-Term Debt 2,607 3,845
Cash and Cash Equivalents   2,902   4,695
Total Net Debt   3,061   1,748
Shareholders’ Equity   16,553   14,131
Capitalization   22,516   20,574
LTM Adjusted EBITDA 7,121 6,218
Net Debt /LTM Adjusted EBITDA   0.43x   0.28x
 

As of December 31, 2018, total cash and cash equivalents were Ps.2,902
million compared with Ps.4,695 million as of the December 31, 2017
mainly due to increased capex investments and higher borrowings
repayments. Total debt at the close of the quarter stood at Ps.5,963
million, composed by Ps.3,355 million in short-term borrowings,
including the current portion of long-term borrowings (or 56% of total
borrowings), and Ps.2,607 million in long-term borrowings (or 44% of
total borrowings).

As of December 31, 2018, 41%, or Ps.2,425 million, Loma Negra’s total
debt was denominated in U.S. dollars, 44% (or Ps.2,633 million) in
Guaraníes, and 15% (or Ps.905 million) in Argentine pesos. The average
duration of Loma Negra’s total debt was 1.6 years.

As of December 31, 2018, Ps.3,014 million, or 51%, of the Company’s
total consolidated borrowings bore interest at floating rates, including
Ps.60 million of Peso-denominated borrowings that bore interest at rates
based on the Buenos Aires Deposits of Large Amount Rate, or BADLAR,
Ps.2,425 million of foreign currency-denominated borrowings that bore
interest at rates based on Libor, and Ps.529 million of borrowings with
other floating interest rate.

The Net Debt to Adjusted EBITDA (LTM) ratio increased to 0.43x as of
December 31, 2018 from 0.28x as of December 31, 2017 reflecting the use
of funds in operations and investing activities.

Cash Flows

Table 7: Condensed Interim Consolidated Statement of Cash Flows
FY18 and FY17 (unaudited)
(amounts expressed in millions of pesos, unless otherwise noted)
 
 

Twelve-months ended
December 31,

    2018   2017
CASH FLOWS FROM OPERATING ACTIVITIES  
Net profit for the period 1,951 3,678
Adjustments to reconcile net profit to net cash provided by
operating activities
3,893 2,128
 
Changes in operating assets and liabilities: (1,664) (729)
Net cash generated by operating activities 4,179 5,077
 
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment, Intangible Assets, net (4,178) (2,238)
Others (46) 9
 
Net cash used in investing activities (4,224) (2,229)
 
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds / Repayments from borrowings, Interest paid (2,390) (1,759)
Dividends paid (771)
IPO proceeds 2,843
Net cash (used in) generated by financing activities (2,390) 312
 
Net decrease in cash and cash equivalents (2,435) 3,160
Cash and cash equivalents at the beginning of the year 4,695 1,480
Effect of the re-expression in homogeneous cash currency
(“Inflation-Adjusted”)
(98) (51)
Effects of the exchange rate differences on cash and cash
equivalents in foreign currency
741 105
 
Cash and cash equivalents at the end of the period   2,902   4,695
 

During FY18, the Company made capital expenditures for a total of
Ps.4,224 million, of which 35% was allocated to the expansion of
production capacity of L’Amalí plant. In the FY18, cash flow generated
by operating activities was Ps.4,179 million compared to Ps.5,077
million in FY17 explained mainly by higher tax payments.

Expansion of L’Amalí Plant.

Loma Negra is moving ahead with the capital expenditure at its L’Amalí
plant, which will add 2.7 million tons annually and drive higher
profitability. This expansion involves a total capital expenditure,
originally estimated at approximately US$350 million, and is expected to
be completed early 2020.

For this project, the Company contracted Sinoma International
Engineering Co. Ltd. (“Sinoma”) for the construction of the new cement
production line with a capacity of 5,800 tons per day of clinker. The
agreement includes the engineering, provision and shipment of all the
equipment for the plant and its construction.

The Company continued to make progress with overall project execution
during the quarter. Main equipment are under the delivery-to-site
process. In addition, the steel structure is under construction and the
electromechanical construction works started by year end. Civil works
for major equipment remain on schedule. Additions to Property, Plant and
Equipment related to this project during 4Q18 amounted to approximately
Ps.1.900 million, and Ps.3.300 million during the whole year, or
approximately US$ 50 million and US$ 96 million, respectively.

Hyperinflationary economy

In recent years, inflation levels in Argentina have been high, having
accumulated an inflation rate in the last three years that has exceeded
100%, without expectations of a significant decrease in the short term.
Likewise, the presence of qualitative indicators of high inflation,
provided in the International Accounting Standard No. 29 (IAS 29),
showed coincident evidence. Therefore, on September 29, 2018, the FACPCE
(Federación Argentina de Consejos Profesionales de Ciencias Económicas)
issued Resolution JG No. 539/18, approved by the CPCECABA (Consejo
Profesional de Ciencias Económicas de la Ciudad Autónoma de Buenos
Aires) through Resolution CD No. 107/18, indicating, among other issues,
that Argentina should be considered an inflationary economy in
accordance with the terms of professional accounting standards as of
July 1, 2018, in line with the vision of international organizations.

International Accounting Standard (“IAS”) 29 states that, in a context
of high inflation, financial statements must be presented in a standard
unit of measurement; that is, in a inflation-adjusted currency at the
end of the reporting period. However, the Company could not present its
restated financial statements because Decree No. 664/03 of the National
Executive Power (PEN) prohibited official bodies, including the
Argentinean National Securities Commission (CNV), from receiving
financial statements adjusted for inflation.

Through Law No. 27,468, published on December 4, 2018 in the Official
Gazette of the Nation, Decree No. 1,269/02 of the PEN and its amendments
were repealed (including Decree No. 664 of the aforementioned PEN). The
provisions of the aforementioned law entered into force as of December
28, 2018, the date on which CNV General Resolution No. 777/18 was
published, which established that the annual financial statements, for
intermediate and special periods that close as of December 31, 2018
inclusive, must be submitted in homogeneous currency
(“Inflation-Adjusted”).

In accordance with IAS 29, the amounts of the financial statements that
are not expressed in the currency of the period in which they are
reported must be restated by applying a general price index. For this
purpose, and as established by Resolution JG N ° 539 of the FACPCE,
coefficients calculated from indices published by the Federation have
been applied, resulting from combining domestic Consumer Price Indexes
(CPI) published by the INDEC (National Statistics and Census Institute)
to from January 1, 2017 and, backwards, internal Wholesale Price Indexes
(IPIM) prepared by said Institute or, in its absence, consumer price
indexes published by the General Directorate of Statistics and Census of
the City Autonomous University of Buenos Aires.

Contacts

IR Contacts
Marcos I. Gradin, Chief Financial Officer and
Investor Relations
Gastón Pinnel, Investor Relations Manager
+54-11-4319-3050
[email protected]

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