Loma Negra Compañía Industrial Argentina SA Q1 FY2023 earnings call

• Started the year in good shape with solid results despite macroeconomic uncertainty. - Industry remained with positive momentum. - Distributed a dividend payment of $19.5 million and recently distributed in kind another dividend of ARS22.2 billion. - Ended the quarter with a cash position of ARS19.4 billion and total debt at ARS42.3 billion, net debt to EBITDA ratio 0.46 times. - Issued class one domestic bonds for ARS25.6 billion, well received by the market.

For the first quarter, top line increased 2.9%. Cement, masonry cement online segment was down 3.5% with volumes growing 4.3% y-o-y. Concrete revenues increased sharply 32.8% with volumes up 26.2%. Aggregates showed a significant top line expansion of 65.3% with sales volume increasing 47%. Record revenues decreased 5.7% y-o-y. Segment EBITDA for the first quarter stood at $63 million, up 15% from first quarter 2022. Adjusted EBITDA for the quarter stood at $63 million, up 5.8% from $60 million in the same quarter a year ago. In pesos, adjusted EBITDA was down 19.7%, reaching ARS10.6 billion with consolidated EBITDA margin of 26.2%.

• Cautiously optimistic for upcoming months as economic volatility might increase with elections affecting activity. - Thermal energy costs increment this year was lower than other regions, with contracts signed below $3 for near future. - Pipeline in Vaca Muerta moving forward as scheduled, forecast production good, contracts linked to production improvement expected to improve margins.

• Macroeconomic uncertainty. - Elections potentially affecting construction activity level. - Political scenario volatility and its implications on public spending and infrastructure financing.

Q: One thing that I was a little bit surprised on the results was the increase on the energy expense. On the other hand of the global energy price, maybe Argentanian dynamics is a little bit different. So if you could give some color about the [contract] that we had for the remainder of the year, and what we should expect on this line?

A: …and actually thermal energy, we've had an increase this year and also by the end of last year. The good news there is that this increment was lower than you could see in other regions and the outcome for the near future is also positive. [Indiscernible] this year we should be around $3.2 million BTU. [Several] contracts that we already signed for the next few years are below $3.

Q: Just a follow-up on the last question in terms of thermal costs. That contract you say you signed below $3, is it related to the gas pipeline expansion and can we assume that going forward, one of your competitive advantages will be your ability to tap into much lower gas costs coming from Vaca Muerta? And I know it might be too early, but can you share with us the savings in terms of EBITDA or EBITDA margins that you think you can gain from these competitive advantages?

A: The pipeline is moving forward as scheduled. The forecast production in Vaca Meurta for this year are very good, and several of the contracts that we signed are linked to this improvement in production. [The comment] before the improvement in the price of the gas that we are paying is going to lead to and improve also in our margins for the next few years. Regarding gas supply, we don't see any competitive advantage with the other cement producers in Argentina.

Q: Given the current [elevated] inflation environment, could you please discuss your pricing strategies, specifically, the frequency of price increases and how these adjustments are impacting demand for your cement products? Also, if you have observed any changes in demand as a result of the recent fluctuations in the [indiscernible]?

A: Could you repeat the last line, we didn't hear you well?

Q: The last part?

A: Yes, the whole question please.

Q: If you're observing changes in demand as a result of the recent fluctuations in the [blue chip shortage]?

A: Regarding prices, we are increasing prices in a monthly basis. We always say it's a combination between our cost inflation and for the inflation in general and the -- this part of the year for the late of the year, we are mostly in line with inflation. Regarding the volatility of the market, the macro political situation always brings some noise. On the other hand, when the gap between the official effects and the blue chip effects widens, this typically brings some -- it's a driver for the…