Loma Negra Compañía Industrial Argentina Sociedad Anónima ($LOMA)

Good morning, and welcome to the Loma Negra First Quarter 2026 Conference Call and Webcast. [Operator Instructions] Mr. Sergio Faifman will also be responding in Spanish immediately following the English translation. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mr. Diego Jalon, Head of Investor Relations. Please, Diego, go ahead.

Thank you. Good morning, and welcome to Loma Negra's earnings conference call. By now, everyone should have access to our earnings press release and the presentation for today's call, both of which were distributed yesterday after market close. Joining me on the call this morning will be Sergio Faifman, our CEO and Vice President of the Board of Directors; and our CFO, Marcos Gradin. Both of them will be available for the Q&A session. Before we proceed, I would like to make the following safe harbor statements. Today's call will contain forward-looking statements, and I refer you to the forward-looking statements section of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances. This conference call will also include discussion on non-GAAP financial measures. The full reconciliation of the corresponding financial measures is included in the earnings press release. Now I would like to turn the call over to Sergio.

Thank you, Diego. Hello, everyone, and thank you for joining us this morning. I would like to start my presentation by discussing the highlights of the quarter. Then Marcos will take you through our market review and financial results. Following that, I will share some final remarks before opening the call to your questions. Starting with Slide 2. We began the year with renewed expectation as industry volume were relatively softer at the start of the year, reflecting a slower exit from the summer season. March showed a more encouraging level of activity, allowing the quarter to close on a positive note with cement volume growing 1.8% and consolidated net revenue up 1.1% year-over-year. In terms of quarterly performance, we delivered improvement in margin and EBITDA generation per ton, both sequentially and year-over-year. Consolidated adjusted EBITDA margin reached 24.9%, expanding 94 basis points year-over-year and 528 basis points sequentially. EBITDA generation per ton stood at $37.6 up 5% year-over-year. As previously indicated, the actions we have been implementing are beginning to be reflected in our results position as well as a wide and more sustainable recovery in demand. During the quarter, we successfully issued our Class 6 corporate bond for a total of $60 million, [indiscernible] our balance sheet and extending our debt maturity profile. As of quarter end, net debt stood at $186 million, representing a net debt to LTM adjusted EBITDA ratio of 1.3x. I will now hand over the call to Marcos Gadin, who will take you through our market review and financial results. Please, Marcos, go ahead.

Thank you, Sergio. Good morning, everyone. Please turn to Slide 4. The most recent economic data paints a weak picture at the start of 2026. The EMAE, Argentina's monthly economic activity indicator registered a 2.1% year-over-year decline in February, with industry and commerce posting the sharper contraction, down 8.7% and 7%, respectively. This interrupted a 2-month streak of positive leads recorded in December and January. Growth continues to be driven by sectors linked to the external front: mining, agriculture and financial intermediation, while domestic demand-driven sectors remain under pressure. Construction has shown greater resilience. The ISAC posted 0.7% year-over-year decline in February. But on a cumulative basis, the first 2 months of 2026 show a slight increase of 0.3% versus the same period last year. Leading indicator points in the same direction. Registered private sector employment in construction grew 3.6% year-over-year in January and building permits authorized in the same month expanded by 3.1%. The sector is not yet accelerating, but it is holding its ground. Within this context, the cement industry dispatches follow a similar pattern throughout the quarter. January and February were soft, weighed down by a later than usual exit from the summer season and still cautious activity levels. March, however, was significantly stronger, increasing by 11% year-over-year and allowing the quarter to close broadly in line with the prior year. In terms of product mix, bulk segment outperformed, supported by larger scale projects, while bag segment, which represents 56% of the industry mix remained relatively weak, consistent with more cautious behavior in the retail and small contractor segment. Looking ahead to the near term, April dispatches figures are expected to reflect the impact of an unusually rainy month. Persistent and intense rainfalls across much of the month disrupted construction activity in the country's main urban centers. We view this as a transitionary weather-related effect and do not see it as indicative of any change in underlying demand trends. Turning to Slide 5 for a review of our top line performance by segment. First quarter revenues increased by 1.1% year-over-year, reversing the trend of previous quarters. The performance was mainly driven by stronger top line results in the cement business, followed by the Railroad segment, partially offset by lower revenues in the Concrete and Aggregates segments. In the Cement, Masonry and Lime segment, revenues increased by 0.8% year-over-year. Volumes growth was partially offset by pricing, although its performance remained broadly in line with inflation. Volumes grew by 1.8% year-over-year with all segment maintaining a strong performance, supported by higher activity from concrete producers, larger-scale projects and public works. Conversely, bagged cement volumes remained under pressure, reflecting softer retail demand and more cautious behavior among small contractors. However, March showed a more favorable dynamic in bagged cement dispatches helping to narrow the year-over-year gap for the quarter. Concrete revenues decreased by 1.9% year-over-year. Despite a 14% decrease in volumes, volume growth was primarily supported by private developments related to logistic infrastructure and larger-scale residential projects, while sustained public works activity in the Province of Santa Fe supported dispatches in Rosario. On the other hand, pricing remained under pressure amid a highly competitive environment. Aggregates revenues remained broadly stable, declining by 0.2% year-over-year. Sales volumes fell by 18.3%, driven by lower demand from concrete producers and construction companies. However, this negative volume impact was offset by improved pricing and a favorable sales mix, and reduced demand from road construction projects lowered the share of fine aggregates, which carry a lower average price. Railroad revenues increased by 2.2% in the quarter as higher transported volumes, up 14.8%, were partially offset by softer pricing conditions. Volume performance was mainly supported by increased transportation of granitic aggregates, cement and chemicals. Moving on to Slide 7. Consolidated gross profit remained broadly in line, declining slightly by 0.3%, where gross margin contracted by 37 basis points year-over-year to 26.1%. However, margins show a sequential recovery of 256 basis points compared to the previous quarter. Cost of sales increased by 1.6% year-over-year, mainly reflecting higher costs in the Cement segment, partially offset by lower cost of sales in the concrete and aggregates businesses. Additionally, there was a greater impact from depreciation following the completion of the 25-kilogram bagging project. In the Cement segment, cost of sales increased by 3.8% year-over-year and by 2% on a per-ton basis. Higher depreciation impact the segment following the completion of the 25-kilogram bagging project. Additionally, packaging related to the implementation of the 25 kilo bag and maintenance put upward pressure on the cost base. On the other hand, energy inputs, freight and salaries contributed to cost containment efforts. The other segments contributed positively to the consolidated results, posting gross margin expansion. Finally, SG&A expenses decreased by 3.9%. This decrease was mainly driven by lower salary and freight expenses, partially offset by higher IT and marketing expenses. As a percentage of sales, SG&A stood at 11.1%, decreasing by 58 basis points compared to first quarter of 2025. Please turn to Slide 8. Consolidated adjusted EBITDA for the quarter stood at $45 million, while in pesos it reached ARS 54.6 billion, reflecting a 5.1% year-over-year improvement. This increase was driven by improved results across all segments. As a result, the consolidated EBITDA margin expanded to 24.9%, representing a 94 basis point increase year-over-year. On a sequential basis, it improved significantly, rising 528 basis points quarter-over-quarter. In the Cement segment, adjusted EBITDA margin stood at 28.8%, remaining broadly in line with the first quarter of 2025. Higher cost of sales and softer pricing were offset by a lower impact from SG&A expenses. The Concrete segment adjusted EBITDA margin expanded by 424 basis points, but remained negative at minus 1.2% compared to minus 5.5% in the first quarter of 2025. The recovery in sales volumes, coupled with improved cost of sales have helped reduce the loss, although we continue to be affected by softer pricing dynamics in a highly competitive environment. Similarly, the Aggregates segment improved its margin by 643 basis points, although it remained in negative territory, reaching minus 18.3% in the quarter from minus 24.7% in the same period last year. The contraction in volumes and cost pressures were partially offset by improved pricing, mainly driven by a favorable product mix. Finally, in the Railroad segment, adjusted EBITDA margin improved by 160 basis points year-over-year, reaching minus 3.9% in the first quarter compared to minus 5.5% in the same period of 2025. Transported volumes increased, contributing to the dilution of fixed cost, although this was partially offset by a higher impact from SG&A and lower gains in the other gain and losses. Additionally, pricing continues to weigh on the segment's results amid a still challenging environment. Moving on to the bottom line on Slide 10. Net profit attributable to the owners of the company totaled ARS 41 billion for the quarter compared to ARS 28.5 billion in the first quarter of 2025. The improvement was mainly driven by higher financial gains, coupled with improved operating performance. However, this increase was partially offset by higher income tax expenses. On the financial side, the company reported a net financial gain of ARS 32.4 billion for the quarter compared to a net financial gain of ARS 11.8 billion in the same period of last year. The year-over-year improvement was mainly attributable to foreign exchange gains resulting from the appreciation of the peso, approximately 5%, during the quarter on our U.S. dollar-denominated liabilities. Additionally, net financial expenses increased by 19% to ARS 12.5 billion, primarily driven by lower finance income and higher financial expenses. Moving on to the balance sheet. As you can see on Slide 11, we ended the quarter with net debt of ARS 259 billion and a net debt-to-EBITDA of 1.3x, down from 1.47 at the end of 2025. Cash flow from operating activities totaled ARS 19.7 billion in the quarter compared to a cash flow of ARS 1.8 billion in first quarter of '25. The year-over-year improvement was mainly driven by lower working capital requirements and improved operating results. We saw improvements in account payables and our receivables while inventory grew at a lower pace than last year, supporting cash generation. This came despite the quarter being one of the most working capital intensive of the year as we concentrate clinker production during the summer to avoid higher energy cost in the winter. On the other hand, tax liability, advance from customers and trade receivables partially offset this positive effect. Regarding investing activities, the company used ARS 12 [ million ] with CapEx totaling ARS 11 billion down following the completion of the 25-kilogram bagging project. On the financial side, the company generated ARS 16 billion during the quarter related to the issuance of the Class 6 bond and the subsequent repayment of borrowing. In January 2026, the company completed the issuance of a $60 million Class 6 corporate bond with a 36-month tenure. This transaction was well received by the market, attracting strong investor demand, allowing the company to secure a 6.5% interest rate. With this issuance, the company has fully covered its U.S. dollar maturities for the year and extended the duration of its debt, maintaining a comfortable maturity profile. In U.S. dollars, net debt stood at $186 million with an average duration of 1.4 years. As of the quarter, 85% of the total debt was denominated in U.S. dollars while the remaining in pesos. Now for our final remarks, I will hand the call back to Sergio. Thank you.

Thank you, Marcos. Now to finalize the presentation, may I please ask you to turn to Slide 13. After a slow start to the year for the industry, March showed an improved dynamic, allowing us to maintain our expectation for the year, subject to the evolution of the economy. The decline and stabilization in interest rates, along with easing of monetary [ trend lines ] should have a positive impact in the coming quarter with credit expected to [indiscernible] positive momentum. In this context, we remain confident in sustaining the positive trend in margin recovery that began to materialize this quarter. The expansion in our segment EBITDA margin reflects the tangible results of our ongoing focus on cost discipline, operational efficiency and our leadership position in the history. We expect these efforts to continue supporting performance as the year progresses. Looking ahead, we maintain a cautiously optimistic outlook. Key growth drivers remain in place. Infrastructure investment linked to resi projects, the housing deficit, low concession and the broader construction in cities continue to support medium-term demand. While the pace of recovery has been somewhat slower than initially anticipated, we see conditions for a gradual and sustained improvement taking shape. We are well positioned to capture the opportunity this recovery will bring. Our operational platform, financial discipline and the steps taken to run our capacity at efficient level as well prepare to respond as volume consolidating in the coming quarter. Finally, the completion of the restructuring process of our indirect controlling shareholder marks the beginning of the new chapter for Loma. I would like to welcome the new shareholder of InterCement and a new member of our Board of Directors to [ expect ] this new phase to further strengthen our leadership position and reinforce our commitment to the sustainability development of the country. This is end of our prepared remarks. We are now ready to take questions. Operator, please open the call for questions.

[Operator Instructions] Also please note that Mr. Sergio Faifman will be responding in Spanish immediately following an English translation. And the first question will come from Sofia Vatta with Latin Securities.

Regarding the cement dispatches and given that April is likely to come in weak, what are the trends you are seeing in May? And how do you expect volumes for the rest of 2026?

Sofia, thank you for your question. [Interpreted] As you mentioned, the volumes for April are going to be coming lower than what we have been seeing before. And clearly, this has to be due to the impact of weather. We are still optimistic for the volumes for May and the remainder of the year. We believe that many of the projects that have been announced should start boosting volumes ahead. And we are still thinking of growth for the year of high single digit.

The next question will come from Andres Cardona with Citi.

With the change in the shareholder base of InterCement and healthier balance sheet nowadays, how do you see Loma Negra's business plan changing because of the new outlook for both, right, InterCement, but in particular, concerned about how your strategy could change going forward?

Andres, thank you for your question. [Interpreted] Loma always had a business plan thinking about Loma and not InterCement. Logically, this change in our indirect controlling shareholder brings us some opportunities of thinking on longer terms. And this probably can bring us more opportunities to keep on growing in the coming years, logically thinking about controlling shareholders that have a more healthy financial situation.

The next question will come from Daniel Rojas with Bank of America.

I wanted to take a step back and try to look at your commercial strategy now in a context of a low inflationary environment, you're probably having to shift your paradigm as you try to look at other competitors and how they look or think about pricing and how you look at pricing yourself. So I was just curious as to this change, can you give us any color on how you're thinking about pushing price increases through your portfolio, aggregates, cement, concrete? And then how should we as analysts should start thinking about the cement industry in Argentina as you normalize and your commercial strategy starts to look more like other countries?

Daniel, thank you for your question. [Interpreted] In this scenario, we continue our commercial strategy where we try to maximize price and profitability. Logically, with this new context, we keep a close eye on costs, and with this cost management and price increases, keep on improving profitability ahead. We are confident to keep the pricing power and profitability shown in this first quarter for the upcoming quarters.

If I may have a follow-up. When you think about this new strategy, are you pushing for prices on a quarterly basis? Or should we continue to expect monthly adjustments? I'm just trying to get a better sense of how you're going to be able to adapt to the new inflationary environment.

[Interpreted] We've come from scenarios where we were increasing prices on a monthly basis. Now depending on the impact of inflation in our costs, those adjustments could be monthly, on a 2-month basis or on a 3-month basis. We are not foreseeing a change in our commercial strategy in the market.

Okay. And one last one, sorry. Are you seeing pressure from energy prices like diesel or gasoline, which your peers and other logistics or transportation sectors are seeing because of what's happening in the Middle East?

[Interpreted] We saw some impact regarding gasoline or diesel in regards of freight. Since the beginning of the war, the gasoline has increased around 20%, and this has an impact on freight and the raw materials, that also had an impact due to freight. It's important to have in mind that we use, for our production, natural gas. And the contracts that we used and the ones that we are going to start using on our production cycle, they didn't suffer increases. Furthermore, we have signed contracts with lower terms.

The next question is a follow-up from Andres Cardona with Citi.

I just wanted to try to get some color about how margins could look like into the second Q. It was a very positive surprise to see the performance during the first quarter. So I just wanted to understand if this number remain relatively flat, maybe improve further or we should see a deterioration because of the higher prices or anything? Just directionally speaking, how do you see margin in second Q?

Again, Andres, thank you for your question. [Interpreted] For us, margins were not a surprise. We have been working on cost management very strongly and a consistent strategy regarding pricing and market. Due to different situations last year, we had a drop in margins and we are reverting that situation. And for the upcoming months, we are expecting to maintain this level of margins or even improve them.

And this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Diego Jalon for any closing remarks. Please go ahead.

Thanks again for joining us today. We appreciate your continued interest and look forward to reconnecting with you in our next call. Thanks again, and have a nice day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call]