On Monday, Shares of Loma Negra Compania Industrial Argentina SA (NYSE: LOMA) declined -3.13% to $11.16. The stock opened its trade at $11.37 and after floating in a price range of $11.13 to $11.67; the stock grabbed the investor’s attention and traded 357.58K shares as compared to its average daily volume of 884.95K shares. The stock’s institutional ownership stands at 43.83%.
Loma Negra, (LOMA) (LOMA), the leading cement producer in Argentina, recently declared results for the three-month period ended March 31, 2018.
Review of Financial Results
Net revenue increased 41.6% to Ps.4,534.0M in 1Q18, from Ps.3,202.0M in the year-ago quarter, principally reflecting strong growth in Argentina – mainly in the Cement, masonry and lime segment and the Concrete segment.
Cement, masonry and lime revenues in Argentina were up 41.1% YoY, to Ps.3,400.0M driven by both higher volumes and price increases. Revenues in Paraguay rose 23.1%, reaching Ps.346.0M in the quarter as the 5.2% YoY decline in volume was more than compensated by the depreciation of the Argentine peso.
Concrete revenues in Argentina, rose 96.5% YoY to Ps.707.0M reflecting volume growth and increased prices. In addition, Railroad revenues increased 22.9% to Ps.441.0M despite lower volumes, while Aggregate revenues were up 31.3% reaching Ps.68.0M during the period.
Cost of sales rose 43.1% YoY to Ps.3,233.0M in 1Q18, as a result of cost inflation, greater sales volume, and a higher share of Concrete sales. Cost of sales in the quarter was also influenced by a temporary increase in supply costs.
As a result, Gross profit increased 38.0% YoY reaching Ps.1,301.0M in 1Q18 from Ps.943.0M in 1Q17, with gross margin contracting 74 basis points YoY to 28.7%. While Gross profit margin in the Cement, masonry and lime segment in Argentina increased 221 basis points in the period, this improvement was more than offset mostly by robust growth in the lower-margin Concrete segment and lower transported volumes in the Railroad segment.
Selling and Administrative Expenses:
Selling and administrative expenses (SG&A) in the first quarter of 2018 rose 21.7% YoY in absolute values to Ps.327.0M, from Ps.269.0M in 1Q17. As a percentage of revenues, SG&A declined 118 basis points to 7.2% in 1Q18 from 8.4% in the year-ago period mainly driven by higher cost dilution together with a reduction in the effective sales tax rate.
Adjusted EBITDA increased 40.6% year-over-year in 1Q18 to Ps.1,166.0M, driven principally by continued growth in volumes and prices.
Finance Costs, Net:
During 1Q18, total finance costs, net increased by 197.7% YoY, or Ps.100.0M, reaching a net cost of Ps.151.0M, mainly because of foreign exchange differences.
The Company stated a foreign exchange loss of Ps.109.0M in 1Q18, as a result of the 7.3% peso depreciation as contrast to a Ps.87.0M gain in 1Q17 when the peso appreciated 3.0%.
Financial income, in turn increased Ps.104.0M reflecting a higher cash balance, while financial expenses rose by Ps.8.0M.
Net Profit and Net Profit Attributable to Owners of the Company:
For 1Q18, Loma Negra stated Net Profit of Ps.549.0M, up 37.4% from Ps.399.0M in the year-ago period. The effective tax rate declined to 28% in 1Q18 from 32% in 1Q17, as a result of the adjustment in deferred taxes in Argentina from the recent Tax Reform which reduced the income tax rate from 35% to 30% in 2018 and 2019, and to 25% thereafter.
Net Profit Attributable to Owners of the Company for the quarter increased 48.6% YoY, or Ps.172.0M, to Ps.526.0M. During 1Q18, the Company stated earnings per common share of Ps.0.88 and earnings per ADR of Ps.4.41, contrast with earnings per share of Ps.0.63 and earnings per ADR of Ps.3.13 in 1Q17.
As of March 31, 2018, total cash and cash equivalents were Ps.2,294.0M. Total debt at the close of the quarter was Ps.4,559.0M, composed by Ps.1,941.0M in short-term borrowings, counting the current portion of long-term borrowings (or 43% of total borrowings), and Ps.2,618.0M in long-term borrowings (or 57% of total borrowings). This compares with a 27.8% QoQ reduction in cash and cash equivalents from Ps.3,180.0M as of December 31, 2017, while total debt increased by 8.0% sequentially from Ps.4,364.0M during the same period, as a result of seasonally higher working capital needs, together with increased capex investments.
As of March 31, 2018, 43.4%, or Ps.1,979.0M, Loma Negra’s total debt was denominated in U.S. dollars, 33.7% (or Ps.1,537.0M) in Guaraníes, and 22.9% (or Ps.1,043.0M) in Argentine pesos, with an average duration of 0.8 years.
At the close of 1Q18, Ps.2,643.0M, or 58.0%, of the Company’s total consolidated borrowings bore interest at floating rates, counting Ps.296.0M of Peso-denominated borrowings that bore interest at rates based on the Buenos Aires Deposits of Large Amount Rate, or BADLAR, Ps.1,916.0M of foreign currency-denominated borrowings that bore interest at rates based on Libor, and Ps.431.0M of borrowings with other floating interest rate.
During 1Q18, the Company made capital expenditures for Ps.854.0M, 32% of which were related to maintenance of existing capacity and 68% directed to the modernization and expansion of production capacity of L´Amalí plant. Cash flow from operations increased to Ps.86.0M in 1Q18 from Ps.84.0M in the year ago quarter reflecting the strong operating performance which was partially offset by the increase in working capital.
LOMA has a market value of $1.33B while its EPS was booked as $0.56 in the last 12 months. The stock has 119.21M shares outstanding. Analyst recommendation for this stock stands at 2.20.