Loma Negra Compañía Industrial Argentina Sociedad Anónima Price & Performance (LOMA)

This conference call also include discussion on non GAAP financial measures, The full reconciliation of the corresponding financial measures included in the earnings press release. [indiscernible] Now I would like to turn the call over to Sergio. Thank you, Dingo. Hello, everyone, and thank you for showing us this morning.

I would like to start my presentation by discussing the highlights of the quarter.

Then Marco will take you for market review and financial results. Following that, we'll share some final remarks. Before opening the call your questions. Starting with Slide two, We are present to present Loma Negra fourth and final quarter of the year. 2024 was a year of challenging [indiscernible] and once again demonstrated what we can achieve. I mean, [indiscernible] the construction industry [indiscernible] for our products. We navigated multiple obstacles. While facing moments of uncertainty we're referring our resilience, adaptability and commitment to continued improvement future solidifying our leadership Argentina Cement's market. In terms of our fourth quarter performance, we take great pride delivering strong results. Despite difficult environments. One of the key highlights of the quarter was the significant expansion of our EBITDA margin, by over 600 basis points even with lower volumes. We amend the challenging year as an opportunity from high efficiency. Staying true to the one of our core principle, constantly pushing our same to improve. While volumes continue their gradual recovery, narrowing the year over year gap. The decline dispatch for the quarter impacted our top line Despite this, we delivered an assessment EBITDA of $50,000,000 up 2.4% in peso tons. Our EBITDA margin reaching 29% a substantially improvement from 22.8% in the same quarter of 2023.

On a per ton basis, EBITDA was $39 remaining nearly flat year over year but increasing 10% sequentially. [indiscernible] For the full year 2024, we achieved an EBITDA of $198,000,000 with a margin of 25.9%. Improving by two eleven basis points. On the financial side, both this quarter and throughout the year, strengthened our balance sheet During the quarter, net debt declined by an additional $20,000,000 reaching 157,000,000 and lowering our net debt ratio to below 1x. Please turn to Slide three for a review of our EOT highlights for the year. We take great satisfaction in relation a new addition of the Loma Negra Sustainability Report.

Aiming to share our journey and dedication to sustainability development with all stakeholders. This report is aligned with our 23 goals and the work of the entire company guides by senior management commitment to sustainable development. It has been prepared based on the non financial information disclosure standard of the Global Reporting Initiative. [indiscernible] And the Sustainability Accounting Standard Boards. For the second years, we have audited [indiscernible] by an external consulting firms.

Environmental sustainability is one of the main pillars of which our growth and volume creation are basis. That is why we work every day on the continuous improvement of our operation by optimizing the use of energy and water. Preserving quality and biodiversity and implementing action aimed [indiscernible] our carbon footprint. Regarding this matter, our total greenhouse gas emission intensity scope one. And two stood at five hungry and 6.96 kilogram of CO2 per tonne [indiscernible] Reflecting a 3% year over year decrease. On Mission, Tartone of the cement equivalent reduction was 1.16%. This highlights to an absolute emission reducing of 907,000 tons of CO2 equivalent compared to 2023. Aligning with our 02/1930 sustainability commitments also achieved a 31% reduction in water extraction. While our solid waste [indiscernible] 84%. On the social side, we are convinced that through a strategic partnership, we can transform reality to ensure a more inclusive future. We maintain the implementation of our program in different territory of the country. Benefiting almost 80,000 people directly and 57,000 people indirectly. Guide our principle: We are all Loma. We have second diversity and Inclusion Week. This year, 15 employees from different Loma Negra plant shared their experience of inclusion and diversity in the company.

Regarding the governance effect, we have a new code of ethical and conduct where we incorporate a chapter of commitment to sustainability clear goal to reduce our environmental impact and promote sustainability development in our operation. We continue trying our people on the company's integrated program where we cover 100% of our employees. Reinforcing the commitment to ethical and transparency. We also held the compliance week for the first time which was an opportunity to reinforce a message and share content related to ethical and integrity using. Antitrust ethical line ethical behavior and civil security. We are committed to the principle guiding our action, inclusive of our proposed of transforming people like by promoting sustainability growth. This report reflects such spots I invite you to read its to know the most outstanding results of our company. I will now hand the call to Marco Gradin. Who will walk you our market review and financial results. Please, Marcos, go ahead.

Thank you, Sergio. Good morning, everyone.

Please turn to Slide five.

When analyzing the evolution of monthly sales, across the industry, we can clearly see an improvement between the first second half of twenty twenty four. As represented by the red line. While the first half of the year saw a 31% decline, the second half narrowed the year on year gap to minus 17%. Furthermore, the fourth quarter continued this trend. With a 14% year over year drop closing the year with December volumes just 5% below of the same month 2023. Similarly, January 2025, saw nearly 9% growth in Dispatches. Marking the first year over year increase since March 2023. And breaking a streak of over a year of negative results. As shown in the bottom right, chart. Although rainy weather is expected to impact February, anticipate this positive trend to continue. Bak seven dispatches continue to show greater resilience. Declining less than the industry average. While bulk cement remained the most affected mode of dispatch. As large private construction projects and public works represent its primary market, Mark Cement ended the year with low activity levels but is expected to regain momentum in 2025. While 2024 was a challenging year for the industry, with volumes declining 24%, we believe the most difficult period is now behind us.

The Central Bank's market expectation report also suggests an improved economic outlook, projecting positive [indiscernible] and a 4.6% expansion in 2025. This forecast combined with the expected impact of credit availability and renew interest in large scale projects will likely drive a recovery in cemented budgets throughout 2025. The consolidation of economic policies is expected to support industry's reactivation and lay the groundwork for a long new cycle of sustainable growth. Turning to Slide six for a preview of our top line performance by segment. The fourth quarter top line declined 19.5% primarily due to a weaker performance in the cement segment followed by declines across the other business segments. The cement, major re cement and line segment saw a 19.9% drop with volume contracting 14.1% year over year. Coupled with softer pricing. Pac cement continues to show greater resilience, declining 9% year over year. Outperforming the industry average. While bulk cement remained the most affected category. Concrete revenues fell 26.9% in the quarter. With volumes down 14.4% and prices impacted by a more competitive market in the segment. On the positive side, the decline in sales volume was less pronounced than in bulk seven sales for the already mixed concrete sector.

Supported by increased infrastructure activity and renewable energy projects in 34.2% revenue decline. With sales volume down just 3.1%. Supported by increased Loma construction activity in 3.2% in the quarter. Hydro transported volumes of up 3.1% helped offset softer pricing. The increase in grain transport helped compensate for the decline in Construction Materials but negatively impacted the average price. As grain generate lower revenues per kilometer transported. Finally, for the fiscal year 2024, consolidated revenues declined 23.9% to Ps. $699,000,000,000 down from $919,000,000,000 in 2023. With seven volumes contracting 23.7%. Moving on to Slide eight. Consolidated cost profit remained stable [indiscernible] up 0.1% while gross margin expanded by six forty basis points year over year.

Reaching 32.6% despite lower volume. In the Cement segment, cost management once again play a key role [indiscernible] in mitigating the impact of our weaker top line in fourth quarter. Supported by lower depreciation expenses. The fourth quarter marks the end of the winter seasons typically associated with higher energy costs. Regarding energy inputs, the company began leveraging new thermal energy contracts that benefit from year over year reduction in tariffs. Including short term agreements linked to oil production. On the electricity side, despite higher cost, from a shift [indiscernible] to more expensive generating sources, with less hydro and nuclear and more thermal, the company secure short term contracts with Renewal Energy's producer. Allowing a to partially offset the impacts by utilizing surplus generation. Margins also expanded in the railroad segment supported by cost controls and cargo volume. [indiscernible] though they remain in negative territory. On the other hand, 3.9% primarily due to lower turnover tax and freight costs driven by lower volumes as well as reduced insurance and service expenses. As a percentage of sales, SG and A stood at 12%, up 195 basis points from 10% mainly due to the decline in revenue. For fiscal year twenty twenty four, gross profit declined 18.9% though gross margin expanded 166 basis points to 26.7%.

Please turn to Slide nine. Our consolidated adjusted EBITDA for the quarter stood at $50,000,000 while in pesos, it reached US50 600,000,000.0 up 2.4%. This increase was primarily driven by a stronger performance in the cement segment which boosted the consolidated EBITDA margin to 29%. Expanding six twenty three basis points year over year. Seven segment's adjusted EBITDA margin [indiscernible] to 3.7% up eight fifteen basis points, driven by tight cost management and improved energy input.

Meanwhile, the Concrete segment saw its adjusted EBITDA margin contracted by seven sixty basis points, turning negative at minus 6.1% compared to 1.5% in the fourth quarter twenty twenty three. As cost control efforts were not enough to offset revenues declines. In the aggregate segment, the adjusted EBITDA margin drop to minus 8.9% down from 14.2% in the fourth quarter of twenty twenty three. While Hargas volumes helped narrow the year over year gap, a highly competitive market and an unfavorable product mix weighed on profitability. The Railboat segment showed an adjusted EBITDA margin improvement of three seventy two basis points reaching minus 0.4% compared to minus 4.2% in fourth quarter twenty twenty three. Mortgage growth in transported volumes primarily from increased grade shipments supported performance. However, the higher share of grains negatively impacted the average price. As they generate lower revenue per kilometer. Effective cost control helps mitigate this effect improving overall performance. For fiscal year twenty twenty four, adjusted EBITDA totaled $198,000,000 US182 billion dollars down 17% but with emerging expansion of two eleven basis points to 25.9%. Moving on to the bottom line on Slide 11. This quarter, net profit attributable to owners of the company totaled Ps. 22,400,000,000.0, compared to a net loss of MXN43 billion in the fourth quarter of last year.

The stronger operational performance despite lower volumes was further supported by an improved financial result. On the financial side, the main reason of the variation was the impact of the devaluation in December 2023 that affected the base of comparison. We posted a net financial gain of ARS0.9 billion for the quarter compared to financial cost [indiscernible] ARS81.3 billion in the same period last year. Primarily due to the lower impact of exchange rate differences. Additionally, lower net financial expenses driven by declining interest rates and a reduced debt position further strengthened financial recovery. However, these impacts effects were partially offset by a lower gain on net monetary position, reflecting a weaker impact of inflation adjustments. For the full year 2024, net income attributable to the owner reached 153,800,000,000.0 up from ARS22.4 billion in fiscal year twenty twenty three. Moving on to the balance sheet. As you can see on Slide 12, we ended the quarter with a net debt of 100,000,000,000, reducing our net debt to EBITDA ratio to [indiscernible] 0.89x. Down from 1.4 times at the end of twenty twenty three. Cash flow from operating activities reached up from EUR 47,000,000, EUR 43,000,000, EUR 43,000,000. Cash flow from operating activities reached EUR 47,000,000, EUR 47,000,000, EUR 43,000,000, EUR 43,000,000, EUR 43,000,000, EUR 43,000,000, EUR 43,000,000, EUR 43,000,000, EUR 43,000,000,800,000,000.0 compared to ARS 57,000,000,000 in fourth quarter 'twenty three, primarily due to a less favorable impact from working capital.

We invested 21,200,000,000.0 in capital expenditure this quarter with approximately 40% allocated to the 25 kilogram box projects and the remaining primarily toward maintenance CapEx. During the quarter, the company used ARS1.2 billion in financing activity mainly for the repayment of borrowings and interest payments. In dollar terms, net debt stood at $157,000,000 with a valuation of almost a year reflecting a $20,000,000 sequential reduction. Total denominated debt accounts for 91% of our total debt, with the remainder in pesos. The company's debt maturity profiles remains well balanced with no bond maturities until fourth quarter of twenty twenty five. Now for our final remarks, I'll hand the call back to Sergio. Thank you.

Thank you, Marcos. Now to finalize the presentation, I please ask you to time to Slide 14. In We are very proud of the result achieved in 2024. As we mentioned before, this was a particularly challenging year the contraction sector. As it's in key economic variables impacted [indiscernible] cement consumption. This effect was for the intensity by the suspension of many public work as the way awaiting the establishment of the new framework. We will 2024 as a transition year [indiscernible] On that it's a more stable economic environment. [indiscernible] has a solid foundation for the future growth. [indiscernible] opportunity opportunity to resume our approach drive improvements [indiscernible] to be the most efficiency company. We can be Always guide by our strong corporate principle. Looking ahead 2025, is poised for the growth. This year is set to deliver double digit growth if forecast for the Argentine Economic Materials. Expansion supported by renewed rules for credits and the initiation of Reship Project. Could further boost cement consumption. Cement consumption per capita hit historically low in 2024. While the ten years average remaining among the lower compared to similar economies. This presents significant room for growth. While a substantial housing and infrastructure gap to bridge.

In the same year, we have made significant investment in capacity, positioned us to play a major role in Argentine development. We are ready. I would like to thank all our employees for their commitment and effort throughout the year. I also want to express my gratitude to our stakeholders staying close and supporting each other. Especially in challenging times It was defined as This is the end of 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. Also, please note that Mr. Sergio Feisman will be responding in Spanish immediately following an English translation. Please hold momentarily while we assemble our roster. The first question is from Alexandra Obregon with Morgan Stanley. Please go ahead.

Hi, good morning, Loma Negra team. Thank you for taking my question. I would like to talk about pricing and how you're thinking about it for 2025. So on one side, we have demand troughing and starting to look a little bit better. But also as we look at inflation, it looks like it's appears to be slowing down. So how how should you think or how should we think of strategies for pricing into 2025? And if if you can also talk about competitive dynamics, do you think that is is still supportive of pricing action into 2025? Thank you.

Good morning, Alekandra. Thank you for the quarter. In 2025, we believe that the pricing dynamic is going to be similar to the one we saw in the last couple of years. Maybe with the deceleration of inflation, we're going to have more space between price increments. Similar to the years that we have in the past with low inflation. But we are foreseen scenario with prices go along with inflation. Always supposing that inflation is going to be above the devaluation of the peso. Also if we have an event of major inflation, then the price adjustment would be above the inflation.

Gotcha. That was very clear. Thank you very much.

The next question is from Marcelo Furlan with Itau BBA. Please go ahead. Hi, everyone. Good morning. Thanks for taking my question.

Question here. The question is just a follow-up also for 2025. You If you guys could please give a little bit more color related to volumes. I mean, volumes in the industry declined by 24%, 25% in last year. So I'd like to hear from you guys what could you expect from volume this year. So this is my follow-up. And my question here is related to capital allocation. So once maybe 2025 would be a better year compared to 2024 in terms of volumes, prices, margins and so on. If you guys see room for dividend distributions in 2025 as we saw in 2023. So this is my question as well. Thank you.

Hi, Marcelo. Thank you for the question.

For 2025, we're expecting an increase of two digits year on year. Basically, if we maintain the volumes that we had in the last part of 2024. That will give us this two digit expansion. That may start in the past couple of months. And some public works and the municipal or provincial level that maybe combined with the private sector will be could be starting in the next few months. Can you repeat the second part of the question because we didn't get it right?

Yes, sure. The second part of the question is related to this then for 2025. If you could expect this then for this year? This is all the question.

It's about dividends, sorry, we didn't get it.

Yes, it is about dividends, yes.

Okay. Are you We if you look years back and we still are analyzing the best way to allocate our capital. 2022 and 2023, we paid dividends because we consider it was the best way to return value to shareholders. And initially, Dominio de Cuatro during 2024 with the drop in volume, especially in the first semester and the uncertainty behind that. The world decided not to move forward on paying dividends. And additionally, there was this process with our controlling shareholders. So we decided not to move forward in 2024. A more clear scenario in terms of volume for 2025, we [indiscernible] analyzing with the board the best way to go in terms of capital allocation for 2025.

Okay. Thank you so much, guys.

The next question is from Daniel Rojas with Bank of America. Please go ahead.

Buenos dias. My question is regarding your cost structure [indiscernible] if you see any points of pressure and if you could compare it to 2024, you see any sources of opportunity to increase margins further?

Or where should we be concerned for the next year? Thank you.

We saw it by the end of twenty twenty four and continues in this year. We're seeing some improvements in terms of energy inputs we are working very hard in terms of efficiency and cost management And we do believe that the margin that we show in the fourth quarter are sustainable. Furthermore, if we seeing some improvements in volumes, we are going to see some improvements in margins as well. You have to consider that they're working almost at 50% of our capacity and with no major CapEx we can absorb future growth.

And along those lines, 2025, could you guide us on CapEx And since you are working at 50% capacity and you can ramp up quickly, do you have any large maintenance or should we expect a nice bump in cash flow as a consequence? Thank you.

Basically for this year, we have only maintenance CapEx We are also finalizing the projects of the shift to 25 kilogram slabs. That's going to start we are going to start dispatching them in July. Once finalized this project, we are not expecting any further disbursement in CapEx in just the maintenance CapEx. Could you give us a ballpark number? Estimate of how much in maintenance for 2025, just to give us an idea?

Between all the business, between $55,000,000 $60,000,000 approximately.

Next question is from Esteban Arehta with Balance. Please go ahead. Esteban, your line is open on our end. Perhaps muted on yours.

Hi, good morning. Sorry, I was mute. My question is also on CapEx. What is the remaining CapEx to complete the 25 kilo back project?

Thanks. Hi, Stefan. Thank you for your question. Look, it's The remaining CapEx for the 35 kilo runs back projects is approximately $22,000,000 And this concludes our question and answer session. I would like to turn the conference back over to Diego Gillon for any closing remarks.

Thank you very much for joining us this morning. We really appreciate your interest in our company and we expect to meet you again in our next call. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation.

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