Loma Negra Compañía Industrial Argentina Sociedad Anónima (LOMA) Earnings Call Transcript & Summary

Good day, and welcome to the Loma Negra Second Quarter 2026 Conference Call and Webcast. [Operator Instructions] Also, Mr. Sergio Faifman will be responding in Spanish immediately following an English translation. [Operator Instructions] Please note, that is being recorded. I would now like to turn the conference over to Mr. Diego Jalón, Head of IR. Please, Diego, go ahead. .

Thank you. Good day, 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 today are Sergio Faifman, our CEO and Vice Chairman of the Board of Directors; and Marcos Gradin, our CFO. Sergio and Marcos 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 change events or circumstances. This conference call will also include a discussion of non-GAAP financial measures. The full reconciliation to 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 today. I would like to start my presentation by discussing the highlights of the quarter. Then Marcos will tell you for our market review and then alaresult. Following that, I will share some final remarks before opening the call to your questions. Starting with Slide 2. As we move through the second quarter, industry volumes have not yet fully guiding the momentum we were expecting performance during the quarter was mainly in affect by weak April, impacted by heavy rains while May and June trends were more in line with the level resisted a year ago. Cement volume decreased 1.4% year-over-year while consolidating net revenue increased 21%, reaching Ps. 238.1 billion. In terms of quarterly performance, margin in pesos showed some compression, mainly reflecting higher costs and depreciation, while our top line continued to show a positive trends even as volume remain longing. Consolidated adjustment EBITDA Ps. 48.2 billion, down 2.5% year-over-year. with margin contracting 97 basis points to 20.2%. In dollar terms, however, EBITDA generation per ton stood at Ps. 32.1 up 14% year-over-year, scoring the resilience of our operation even as demand recovery remains gradual. During the quarter, we can sell our Class 4 corporate bonds for a total of $10 million, and we have no reminisctured debt maturity for the rest of the year. as of quarter end net debt stood at $185 million, representing a net debt to LTM adjustment EBITDA ratio of 1.3x. I will now hand off the call to Marcos who will you for our market review and financial results. Please, Marcos, go ahead.

Thank you, Sergio. Good day, everyone. Please turn to Slide 4. The most recent economic data shows a more moderate growth trajectory in the second quarter. In my, Argenta monthly economic activity indicator grew 1.6% year-over-year in April before slowing to 0.2% in May, with a monthly decline of 0.5% versus April. On a cumulative basis, the indicator is up 1.7% through the first 5 months of the year, although the pace of growth has clearly moderated comparably to earlier in the year. Construction activity has shown a similar mix trend. The ISAC declined 2.8% year-over-year in April weighed down by the same heavy rains that affected our segment volumes before rebounding 4.1% year-over-year in May. These indicators remain constructive. Registered private sector employment in Construction grew 1.2% year-over-year in April. And build permits offer us in the same month, expanded by 17% year-over-year with a 7.6% decrease on a cumulative basis on the first 4 months of the year. Within the context industry cement dispatches declined 5% year-over-year during the quarter. Major reflected the impact of heavy rains in April across the country's main urban centers, our own volumes follow a similar trend, but a moderate decline, down 1.4% year-over-year, outperforming the industry as May and June trends normalize closer to last year levels. In terms of product mix, bulk cement continued to perform, supported by larger scale projects, while bag segment, which represents the majority of the industry mix remained relatively weak, consistent with more cautious behavior in the retail and small contractor segment. Looking ahead, we expect a continued and even recovery path we have been describing rather than a change in the underlying demand trend -- that said, we remain casually optimistic going forward as we believe this recovery path remains intact. Turning to Slide 5 for a review of our top line performance by segment. Second quarter revenues increased by 2.1% year-over-year with growth led by the cement business, followed by the Redwall segment, partially offset by lower revenues in the concrete and aggregate segments. In lime and masonry 7 and 9 segments, revenues increased by 2.2% year-over-year. while volumes increased by 1.4%. Pace dispatches continued to outperform, supported by higher activities from compete posers, industrial clients and construction companies, while bakements remain under pressure with the retail segment showing the weak performance. As demand for self construction and refurbishing projects remain delayed. Pricing dynamics remain positive, supporting the segment's top line performance. Concrete revenues decreased by 11.2% year-over-year as an 18.6% decline in volumes was only partially offset by favorable pricing dynamics. Volumes were mainly affected by lower demand from special projects, particularly those in support infrastructure and wind farms, which are now in the final stages of completion. The start of new projects have been gradually pushed back though we expect them to break ground in the near term. Volumes in Rosario remained more stable, supported by a combination of public and private works. Aggregates revenues decreased by 10.3% year-over-year, as a 12.2% decline volumes was only partially offset by favorable pricing dynamics. Volumes were mainly affected by the same dynamics impacted in concrete segment, particularly weaker demand for public works and construction companies. Railroad revenues increased by 8.6% over year as higher transported volumes up 10.1% were partially offset by softer pricing conditions. Volume growth was mainly driven by higher transportation of grain segments and fraction the latter reflecting the resumption of operations in NUKEN following the repair of the rail section in Bayalanka that have been affected by last year's storm. Moving on to Slide 7. Consolidated gross profit decreased by 3.9% year-over-year, with gross margin contracting 122 basis points to 19.2%, mainly reflecting higher cost and depreciation Cost of sales increased by 3.7% year-over-year, reflecting higher costs in the segment and railroad segments, partially offset by lower costs in the concrete and aggregate businesses. In the Cement segment, cost of sales increased on a per ton basis, mainly driven by age depreciation following the capitalization of the 25-kilogram bagging project after June of last year. along with higher packaging costs associated with its implementation, maintenance and freight cost also rose, the later reflecting the pass-through of higher fuel prices. while thermal and electric energy costs remain broadly in line. As planned, most klins were shut down in May to avoid operating during the winter months, helping to remit our exposure to higher energy costs. In railroad, the decrease in cost of sales was mainly related to higher reported volumes together with higher salaries, fuel prices and depreciation. The concrete and aggregates segments both contributed positively to the consolidated results, posting gross margin expansion, although they remain in negative territory. Finally, SG&A expenses increased by 15.7% year-over-year, mainly driven by higher salary expenses. As a percentage of sales, SG&A stood at 12.1%, up 132 basis points compared to the second quarter of 2025. Please turn to Slide 8. Consolidated adjusted EBITDA for the quarter stood at USD 38 million, while in pesos reached Ps. 48.2 billion, reflecting a 2.5% year-over-year decline. This decrease was mainly driven by a weaker result in the railroad segment together with to a lesser extent, a contraction in cement, partially offset by improved results in Concrete and Aggregates. As a result, the consolidated EBITDA margin contracted to 20.2%, representing 97 basis point decrease year-over-year. In the cement segment, adjusted EBITDA margin stood at 23.9%, down 81 basis points year-over-year, a smaller decline in the consolidated construction. As higher cost of sales and SG&A, as discussed in the previous slide, were partially cushioned by favorable pricing dynamics. The Concrete segment's adjusted EBITDA margin expanded by 867 basis points to minus 4.3% from minus 13% in the second quarter of 2025, supported by favorable pricing dynamics and lower cost, although it remained in negative territory. Similarly, the aggregate segment improved its margin by 877 basis points, reaching minus 18.6% in the quarter from minus 27% in the same period last year. Also supported by increasing price and cost control, although it likewise remains in negative territory. Finally, in the railroad segment, adjusted EBITDA margin turned at reaching minus 5.2% in the second quarter compared to a positive 9.8% in the same period of 2025. It was mainly due to higher cost of sales, primarily driven by increased fuel and labor cost, while SG&A expenses remained broadly in line. Moving on to the bottom line on Slide 10. Net profit attributable to owners of the company totaled Ps. 7.5 billion for the quarter compared to a Ps. 0.5 billion in the second quarter of last year. The improvement was mainly driven by lower financial expenses despite softer operating performance and was partially offset by higher income tax expenses. On the financial side, the company reported a total net financial loss of Ps. 5.6 billion for the quarter compared to a net financial loss of Ps. 22.3 billion in the same period of last year. The year-over-year improvement was mainly attributable to a lower foreign exchange loss on our U.S. dollar dominated liabilities. As the peso continues to depreciate during the quarter, though at a more moderate pace than in the third quarter of last year. Additionally, net financial expenses decreased by 27% to Ps. 9.5 billion may be driven by improved financial income, coupled with lower financial expenses. Moving on to the balance sheet. As you can see on Slide 11, we ended the quarter with net debt of Ps. 274 billion and a net debt to adjusted EBITDA ratio of 1.3x and down from 1.47x at the end of 2025. Cash flow from operating activities totaled Ps. 18.1 billion in the quarter compared to a cash outflow of Ps. 29.7 billion in the second quarter of 2025. This year-over-year improvement was mainly driven by a significant improvement in working capital primarily reflecting lower income tax payments during the quarter together with a strong increase in tax liabilities. This was partially offset by higher working capital requirements in trade receivables as well as account payables. Regarding investing activities, the company used Ps. 9.9 billion with CapEx totaling Ps. 9.7 billion, remaining lower following the completion of the 25-kilogram value project. On the financing side, the company used Ps. 13.2 billion during the quarter, mainly related to the repayment of borrowings. In May 2026, the company completed the cancellation of the Class 4 corporate bond for $10 million, leaving no remaining structured debt maturities for the rest of the year. In U.S. dollar terms, net debt stood at USD 185 million with an average duration of 1.4 years. As of quarter end, 87% of total debt was denominated in dollars with the remaining balance in pesos. Now for our final , I will hand the call back to Sergio. Thank you.

Thank you, Marcos. Now to finalize the presentation, I please ask you to on to Slide 14. A volume during the first half of the year come in below our initial expectation. Going forward, we may continue to see some volatility into potential short-term decline at a recovery part is unlikely to be a straight in line. At that time, we remain constantly optimistic that the underlying trend for the second half of the year and beyond is a positive one. We are beginning to see some of the project approval under the recent regine starting to move forward. Beyond that, we see additional factors that could future support volume in the second half of the year, a potential easing of monetary condition and expected improvement in legal-wise and a possible recovery in credit availability. Our top line continued to perform well during the quarter, and we remain in focus on those discipline, and operational efficiency as we navigate with demand recovery. Finally, on August 5, Loma celebrate 100 years anniversary, an important milestone that fill us with pride. We look forward to continuing to support the country development over the next 100 years, just as we have through this past century. 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. [Operator Instructions] The first question is from Sofia Barta with Latin Securities.

It's regarding the second semester, if credit access remains limited, would the other [indiscernible]

Thank you for your question. [Foreign Language] Yes. Actually, we believe that it's difficult to see significant credit improvement in the second half of the year. [Foreign Language] And we do believe there are other factors that should start to impact positively our level of activity. [Foreign Language] Several of the projects that were presented with the regime. We are working on some of those. We expect them to start impact -- to start showing some impact on volumes in the coming months. [Foreign Language] Additionally, on the road concessions that environment has been granted in the past few months. [Foreign Language] And those are already back in our volumes, but they are starting to move forward. So we are expecting to see some more volumes drive by that in the second half of the year. [Foreign Language] And always remember that the months starting in September are a strong response in terms of selling dispatches.

The next question is from Alejandra Obregon with Morgan Stanley.