Loma Negra Reports 1Q20 results

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 March 31, 2020 (our "1Q20”).

The Company is reporting results of its subsidiaries by applying International Accounting Standards 29 – IAS 29 (Financial Reporting in Hyperinflationary Economies) ("IAS 29”).

1Q20 Key Highlights

• Net revenue decreased 29.6% YoY to Ps.7,765 million (US$122 million), mainly reflecting lower economic activity and the impact of the Covid-19 pandemic
• Consolidated Adjusted EBITDA down 17.9% YoY to Ps.2,602 million (US$42 million)
• Consolidated Adjusted EBITDA margin expanded by 479 basis points YoY from 28.7% to 33.5%, mainly explained by margin expansion of high margin cement segments
• Net Debt /LTM Adjusted EBITDA ratio of 1.26x from 0.89x in 1Q19, and 0.86x in FY19

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 financial information herein by applying IAS 29¹.

Commenting on the financial and operating performance for the first quarter of 2020, Sergio Faifman, Loma Negra’s Chief Executive Officer, noted: "In this unprecedented Covid-19 situation, we are proud of the resilience and ingenuity showed by our people to avoid the obstacles faced and to keep on contributing running the business.

2020 started with some headwinds, particularly related with the fragile macro-economic situation of the country and a rampant recession. By the end of the quarter the Corona Virus pandemic outbroke, bringing additional challenges to the already adverse background.

In this context, Cement demand in Argentina in the First quarter contracted around 29% YoY. Our top line for the quarter decreased also around 30% year-on-year to 7.8 billion pesos, and our adjusted EBITDA declined by 17.9%, still we were able to expand margins by 479 basis points to 33.5%, mainly reflecting rigorous focus in cost control and our commitment to maintaining a high productivity and healthy profitability levels. Our core Argentine cement business remained the principal factor behind these margin expansion.

As we announced, on March 20, and in compliance with the government declaration of a wide-ranging lockdown, we temporarily suspended our production facilities and the L´Amalí Expansion project. During this situation, we have intensified our efforts to securing working capital needs, tightening fixed cost structure, and reformulating our capital expenditure priorities.

After the first week of April we resume production and dispatches of cement, with the adoption of new sanitation protocols. As of today, and after governmental permits were granted, L´Amalí expansion works have resumed.

Still, the speed or breadth of a demand recovery is yet to be proven, and we remain alert and cautious regarding the evolution of the crisis”.

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 (figures exclude the impact of IAS 29)

Overview of Operations

Sales Volumes

Sales volumes of cement, masonry and lime in Argentina during 1Q20 declined 26.9% to 1.00 million tons reflecting the negative economic momentum and further impacted by the Covid-19 lockdown. As it has been observed in previous quarters, the bulk segment continued to suffer further than the bag segment, impacted by the halt in the execution in public and private infrastructure works. In Paraguay, sales volumes decreased in the first quarter to 0.13 million tons, or 13.0% when compared to a robust 1Q19 which had been boosted by major works. As a result, consolidated total sales volumes of cement, masonry and lime for the quarter decreased 25.5% YoY to 1.13 million tons.

Sales volumes in the Concrete segment and Aggregates in Argentina plunged 70.4% and 56.0% YoY, to 0.08 million m³ and 0.13 million tons, respectively, impacted primary by the halt in public and private projects execution.

Railroad segment volumes experienced a 14.9% decline versus the comparable quarter in 2019, affected by lower demand in almost every sector.

Review of Financial Results

Net Revenues

Net revenue decreased 29.6% to Ps.7,765 million in 1Q20, from Ps.11.034 million in the comparable quarter last year, mainly reflecting the negative economic momentum and further impacted by the Covid-19 lockdown.

Revenues in Cement, masonry and lime revenues in Argentina dropped 27.7% YoY primary as a result of the volume decline and marginally compensated by an increase in prices of 1%. Cement revenues in Paraguay decreased 13.5% YoY, mainly reflecting the drop in volumes.

Concrete and Aggregate revenues plunged 73.6% and 67.1%, respectively, as both sales volumes and prices declined impacted mainly by the halt in public and private projects execution amid the negative economic context and the COVID-19 limitations. Railroad revenues decreased 24.9% YoY, impacted by lower sales volume and a drop in prices.

Cost of sales, and Gross profit

Cost of sales decreased 31.2% YoY reaching Ps.5,399 million in 1Q20, reflecting, lower volume sold, lower energy input costs, and previous fixed cost structure adequacy efforts.

Gross profit declined 25.6% YoY to Ps.2,366 million in 1Q20 from Ps.3,182 million in 1Q19, with gross profit margin expanding 164 basis points YoY to 30.5%.

Selling and Administrative Expenses

Selling and administrative expenses (SG&A) in 1Q20 decreased 32.1% YoY to Ps.631 million, from Ps.929 million in 1Q19, reflecting lower sales volumes, and previous structure adequacy efforts. As a percentage of revenues, decreased by 29 basis points to 8.1% from 8.4%, with first quarter 2019 including some non-recurrent costs of structure adequacy.

Adjusted EBITDA & Margin

Adjusted EBITDA decreased 17.9% YoY in the first quarter of 2020 to Ps.2,602 million, with Adjusted EBITDA margin expanding 479 basis points to 33.5% compared to 28.7% in 1Q19.

As previously reported, excluding the application of IAS 29, as shown on Tables 1b, Adjusted EBITDA increased 22.3% YoY in the first quarter of 2020, reaching Ps.2,591 million, with Adjusted EBITDA margin expanding 474 basis points to 34.4% compared to 29.7% in 1Q19.

Table 11, presenting financial Data by Segment excluding IAS 29, shows that Adjusted EBITDA for the Cement segment in Argentina increased during the first quarter 35.0% YoY and the margin expanded by 656 basis points to 38.3%. The Cement segment in Paraguay, reported a 23.0% YoY increase in Adjusted EBITDA while Adjusted EBITDA margin was 42.2%, contracting 245 basis points compared to the same period one year ago. In addition, the Concrete and Aggregate segments reported a negative Adjusted EBITDA of Ps.36.0 million and Ps.7.3 million, respectively, mainly as a result of a sharp decline in sales volume. Adjusted EBITDA for the Railroad segment declined by 57.0% in the first quarter of 2020, with Adjusted EBITDA margin of 3.8% contracting 626 bps to from the comparable period in 2019.

Finance Costs-Net

During 1Q20, the Company reported a loss of Ps.456 million in total finance costs-net compared to a loss of Ps.199 million in the previous year first quarter, mainly due to a lower gain on net monetary position and higher financial expenses as a result of higher interest rates and debt position.

Net Financial expense increased by Ps.148 million to Ps.410 million.

Net Profit and Net Profit Attributable to Owners of the Company

Net Profit for 1Q20, decreased 44.4% to Ps.881 million from Ps.1,583 million in the corresponding quarter of the previous year. The effective tax rate was 27.9% in 1Q20 and 16.0% in the year-ago period.

Net Profit Attributable to Owners of the Company decreased 43.0% YoY, or Ps.647 million, to Ps.857 million in 1Q20. During the quarter, the Company reported earnings per common share of Ps.1.4383 and earnings per ADR of Ps.7.1916, compared with earnings per share of Ps.2.5237 and earnings per ADR of Ps.12.6185 in 1Q19.

Capitalization

As of March 31, 2020, total cash and cash equivalents were Ps.2,232 million compared with Ps.2,220 million as of March 31, 2019. Total debt at the close of the quarter stood at Ps.16,794 million, composed by Ps.9,763 million in short-term borrowings, including the current portion of long-term borrowings (or 58% of total borrowings), and Ps.7,031 million in long-term borrowings (or 42% of total borrowings).

As of March 31, 2020, 41% (or Ps.6,965 million) in Argentine pesos, 39% (or Ps.6,557 million), Loma Negra’s total debt was denominated in U.S. dollars, 15% (or Ps.2,487 million) in Guaraníes, and 5% (or Ps.786 million) in Euros. The average duration of Loma Negra’s total debt was 1.1 years.

As of March 31, 2020, Ps.12,789 million, or 76%, of the Company’s total consolidated borrowings bore interest at floating rates, including Ps.3,071 million of Peso-denominated borrowings that bore interest at rates based on the Buenos Aires Deposits of Large Amount Rate, or BADLAR, Ps.5,824 million of foreign currency-denominated borrowings that bore interest at rates based on Libor, and Ps.3,897 million of borrowings with other floating interest rate.

The Net Debt to Adjusted EBITDA (LTM) ratio increased to 1.26x as of March 31, 2020 from 0.86x as of December 31, 2019 reflecting the use of funds in working capital needs and investing activities.

Cash Flows

During 1Q20, the Company made capital expenditures for a total of Ps.4,061 million, of which 79% was allocated to the expansion of production capacity of L’Amalí plant. In the 1Q20, cash flow generated by operating activities was Ps.295 million compared to Ps.854 million in 1Q19, explained mainly by a lower profitability during the period and higher working capital needs.

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.

The Company continued with the overall project execution during the quarter. All imported material of the main equipment were received at site. In addition, civil works for main foundations, silos and buildings structures are completed, as well as the supply of local steel structures. Regarding the electromechanical construction, the crusher was tested, the kiln system erection was completed, and the raw and cement mill erection presents good progress.

On March 20, and in compliance with the Decree 297 (COVID-19), the expansion project had been suspended. As of the date of this Earnings Release a permission to re-start works on the project, under strict sanitation protocols, was granted. The company is restarting works on-site, however the impact of the new construction protocol, or other potential measures related to COVID-19 pandemic may provoke additional delays to the startup of the new production line.

1Q20 Earnings Conference Call

When: 10:00 a.m. U.S. ET (11:00 a.m. BAT), May 12, 2020
Dial-in: 0800-444-2930 (Argentina), 1-833-255-2824 (U.S.), 1-866-605-3852 (Canada), 1-412-902-6701 (International)
Password: Loma Negra Earnings Call

Webcast: https://services.choruscall.com/links/loma200512YGDo9rmb.html

Replay: A telephone replay of the conference call will be available between May 12, 2020 at 1:00 pm U.S. E.T. and ending on May 19, 2020. The replay can be accessed by dialing 1-877-344-7529 (U.S. toll free), or 1-412-317-0088 (International). The passcode for the replay is 10143738. The audio of the conference call will also be archived on the Company’s website at www.lomanegra.com

Definitions

Adjusted EBITDA is calculated as net profit plus financial interest, net plus income tax expense plus depreciation and amortization plus exchange rate differences plus other financial expenses, net plus tax on debits and credits to bank accounts. Loma Negra believes that excluding tax on debits and credits to bank accounts from its calculation of Adjusted EBITDA is a better measure of operating performance when compared to other international players.

Net Debt is calculated as borrowings less cash and cash equivalents.

About Loma Negra

Founded in 1926, Loma Negra is the leading cement company in Argentina, producing and distributing cement, masonry cement, aggregates, concrete and lime, products primarily used in private and public construction. Loma Negra is a vertically-integrated cement and concrete company, with nationwide operations, supported by vast limestone reserves, strategically located plants, top-of-mind brands and established distribution channels. The Company also owns a 51% equity stake in an integrated cement production plant in Paraguay, which is one of two leading cement producers in that country. Loma Negra is listed both on BYMA and on NYSE in the U.S., where it trades under the symbol "LOMA”. One ADS represents five (5) common shares. For more information, visit www.lomanegra.com.

Note

The Company presented some figures converted from Pesos to U.S. dollars for comparison purposes. The exchange rate used to convert Pesos to U.S. dollars was the reference exchange rate (Communication "A” 3500) reported by the Central Bank for U.S. dollars. The information presented in U.S. dollars is for the convenience of the reader only. Certain figures included in this report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be arithmetic aggregations of the figures presented in previous quarters.

Rounding: We have made rounding adjustments to reach some of the figures included in this annual report. As a result, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.

Disclaimer

This release contains forward-looking statements within the meaning of federal securities law that are subject to risks and uncertainties. These statements are only predictions based upon our current expectations and projections about possible or assumed future results of our business, financial condition, results of operations, liquidity, plans and objectives. In some cases, you can identify forward-looking statements by terminology such as "believe,” "may,” "estimate,” "continue,” "anticipate,” "intend,” "should,” "plan,” "expect,” "predict,” "potential,” "seek,” "forecast,” or the negative of these terms or other similar expressions. The forward-looking statements are based on the information currently available to us. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including, among others things: changes in general economic, political, governmental and business conditions globally and in Argentina, changes in inflation rates, fluctuations in the exchange rate of the peso, the level of construction generally, changes in cement demand and prices, changes in raw material and energy prices, changes in business strategy and various other factors. You should not rely upon forward-looking statements as predictions of future events. Although we believe in good faith that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Any or all of Loma Negra’s forward-looking statements in this release may turn out to be wrong. You should consider these forward-looking statements in light of other factors discussed under the heading "Risk Factors” in the prospectus filed with the Securities and Exchange Commission on October 31, 2017 in connection with Loma Negra’s initial public offering. Therefore, readers are cautioned not to place undue reliance on these forward-looking statements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this release to conform these statements to actual results or to changes in our expectations.

Table 9: Condensed Interim Consolidated Statements of Profit or Loss and Other Comprehensive Income (unaudited)

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