Earnings call transcript: Loma Negra Q3 2025 misses forecasts, stock rises

Loma Negra Compania Industrial Argentina SA ADR (LOMA) reported its third-quarter earnings for 2025, revealing a miss on both earnings per share (EPS) and revenue forecasts. The company posted an EPS of $0.0429, falling short of the expected $0.0448, and reported revenue of $135.15 million, significantly below the forecasted $228.57 million. Despite these misses, Loma Negra's stock saw a 2.33% rise in the market, closing at $10.85, reflecting a 1.12% increase in premarket trading.

Key Takeaways

• Loma Negra's EPS and revenue both missed analyst forecasts.
• Stock price increased by 2.33% despite disappointing earnings.
• The company's net debt increased, impacting financial stability.
• The Argentine economy's growth forecast was revised down, affecting market sentiment.
• Loma Negra plans to resume dividend payments in 2026, boosting investor confidence.

Company Performance

Loma Negra's overall performance in Q3 2025 showed a decline compared to the previous year. The company's consolidated adjusted EBITDA fell by 23.7% to $36 million, and its EBITDA margin decreased by 315 basis points to 20.8%. The net loss attributable to owners was ARS 8.5 billion, contrasting with a net gain of ARS 27.9 billion in Q3 2024. The company's net debt rose to $206 million, increasing the net debt-to-EBITDA ratio to 1.49x from 0.89x at the end of 2024.

Financial Highlights

• Revenue: $135.15 million, down from the forecast of $228.57 million
• Earnings per share: $0.0429, below the forecast of $0.0448
• Consolidated adjusted EBITDA: $36 million, a 23.7% year-over-year decline
• Net debt: $206 million, with a net debt-to-EBITDA ratio of 1.49x

Earnings vs. Forecast

Loma Negra's actual EPS of $0.0429 was 4.24% lower than the forecasted $0.0448. Revenue of $135.15 million missed the forecast by 40.87%. These results mark a significant deviation from expectations, reflecting challenges in the company's operational environment and market conditions.

Market Reaction

Despite the earnings miss, Loma Negra's stock rose by 2.33%, closing at $10.85. This increase may be attributed to investor optimism about the company's future prospects, including the potential resumption of dividend payments in 2026 and a focus on price increases above inflation. The stock's performance remains within its 52-week range of $7.04 to $14.17.

Outlook & Guidance

Looking forward, Loma Negra is optimistic about market recovery post-election, expecting stability to unlock investment projects and renew confidence in the industry. The company plans to focus on price increases above inflation and anticipates a potential resumption of dividend payments in 2026, which could enhance shareholder value.

Executive Commentary

CEO Sergio Faifman noted, "The recovery experienced a temporary slowdown, but we believe the underlying growth driver remains intact." He also expressed confidence in recovering prices in dollar terms with a more stable foreign exchange scenario. Faifman added, "If we continue this scenario of low rates and stable FX and a more stable macro, that should give more dynamic to investment projects."

Risks and Challenges

• Economic instability in Argentina could affect demand and pricing.
• Rising net debt levels may impact financial flexibility.
• Potential delays in market recovery could hinder growth prospects.
• Competitive pressures in the cement industry may affect market share.
• Fluctuations in foreign exchange rates could impact profitability.

Q&A

During the earnings call, analysts questioned the company's pricing strategy and its impact on future profitability. Loma Negra aims to increase prices above inflation, leveraging pre-election investment pauses and exchange rate adjustments to potentially accelerate projects. The company confirmed that no dividend payments are planned for 2025, focusing instead on stabilizing its financial position.

Full transcript - Loma Negra Compania Industrial Argentina SA ADR (LOMA) Q3 2025:

Marcos Gradin, CFO, Loma Negra: Good morning and welcome to the Loma Negra Third Quarter 2025 conference call and webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Also, Mr. Sergio Faifman will be responding in Spanish immediately following an English translation. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note that this event is being recorded. I would now like to turn the conference over to Mr. Diego Jalón, Head of IR. Please, Diego, go ahead.

Diego Jalón, Head of Investor Relations, Loma Negra: 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 filing 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.

Sergio Faifman, CEO and Vice President of Board of Directors, Loma Negra: 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 result. Following that, I will share some final remarks before opening the call to your questions. Starting to slide two. During the third quarter, key industry activity lost momentum as the broader economy slowed, the electoral process, and uncertainty around the sustainability of the economic framework. Combined with higher interest rates in pesos ending up negatively affecting shipping levels for both the key industry and for Loma, which declined 5% year over year. That's why volume recording in September and October provides encouraging signs as we look ahead. In terms of results, in this more challenging context, our consolidated adjusted EBITDA margin contracted to 20.8% in the quarter.

However, it remained almost stable versus the previous quarter, despite the higher cost pressure than the typical OCS in the third quarter. Please bear in mind that energy costs are seasonally affected by the winter period. Adjusted EBITDA reached $36 million, reflecting a 23.7% reduction with emission in pesos. On the balance sheet side, net debt declined by $9 million quarter over quarter to $206 million. In addition, following the classified bond issuance, we significantly improved our maturity profile, and our leverage metric remained at a comfortable level for the company. I will now hand off the call to Marcos Gradin, who will walk you through our market review and financial result. Please, Marcos, go ahead.

Marcos Gradin, CFO, Loma Negra: Thank you, Sergio. Good morning, everyone. Please turn to slide four. After a solid first half of the year, forecast for the third quarter 9.0 to a weaker performance of the Argentine economy, and full-year growth expectations were revised down to around 3.9%. This dynamic is fully reflected in construction and the cement industry. The recovery trend began to lose some steam, mainly due to uncertainty around the election process and questions about the sustainability of the economic program. After two quarters of growth, cement dispatches fell around 1% in the quarter, largely explained by a soft July, and although September volumes were the highest in 22 months, they were not enough to offset the quarterly decline. VAC cement remained the most impact format as it is more tied to retail and residential demand.

On the other hand, VAC dispatches continued to perform well, in line with what we saw in the second quarter and reached 44% of total industry dispatches. Looking at the most recent data, October's volumes show renewed strength, with a 7.4% year-over-year increase, and year-to-date volumes are also up 7.4%. Now, with the election behind us, we expect uncertainty to start easing. The outcome of the election could be seen as a validation of the government's policy direction, which may help unlock investment projects that have been waiting for a more stable framework. Overall, we remain optimistic that this renewed confidence will gradually put the industry recovery back on track. Turning to slide five for our review of our top-line performance by segment. Second quarter top-line declined by 12.5%, primarily due to weaker performance in the cement segment, followed by softer results across the remaining segments.

Revenue in the cement, measured in cement and lime segment, declined 13.2% year over year, driven by a 5.4% contraction in volumes and softer pricing year over year. As we mentioned this quarter, we saw a halt in the recovery trend that has started in the first half. VAC cement dispatches continue to be in the dispatch mode, showing the best dynamics, supported by industrial and commercial projects and by larger housing developments. In addition, provincial-level public works began to gain momentum, adding volume to the dispatch mode. VAC cement remained more pressured, as weaker overall consumption continues to impact retail and residential demand. When comparing Loma's performance with the industry, our VAC dispatches grew below the industry this quarter. It is also important to note that our segment includes measuring cement and lime, which behave more similarly to VAC cement, while industry statistics disclose volumes exclusively for gray cement.

In the same sense, top-line was also affected by softer pricing conditions versus third quarter 2024, although cement prices in pesos deliver a positive quarter-over-quarter performance when adjusted by inflation. Concrete revenues remained broadly flat versus third quarter 2024, as a 37.8% increase in volumes except softer pricing dynamics in a highly competitive environment. Volume growth was supported by private developments, mainly logistic infrastructure and residential construction, and also benefited from higher activity in public infrastructure projects across the metropolitan Buenos Aires area and in the province of Santa Fe. Similarly, the aggregates segment also remained flat, posting a slight 0.8% revenue decline. Sales volumes rose 26.3%, driven by higher activity in road construction and railroad projects, partially offsetting the impact of softer pricing.

Pricing was also affected by the sales mix, as road construction projects primarily require fine aggregates, which carry a lower unit price and reduce the overall average. Railroad revenues declined 14.9% in the quarter, a 3.9% increase in transported volumes only partially mitigating the effect of weaker pricing. In addition, the ongoing disruption of the railroad line in Bahía Blanca continues to affect longer-haul traffic, mainly grains, gypsum, and frac sand, reducing ton-kilometer transported and consequently revenue generation. Moving on to slide seven, consolidated gross profit declined 32.5%, while gross margin contracted by 524 basis points year over year, reaching 17.3%. In the cement segment, cost of sales decreased 8.7% year over year, with a 3.5% reduction in unit cost, despite the seasonal impact of higher winter energy costs and higher depreciation associated with the completion of the 25 kilogram bags project. Effective cost management helped offset the weaker pricing environment.

Lower maintenance costs and improved thermal energy inputs prices also supported the quarterly cost structure. Continue the trend from previous quarter: thermal energy contracts signed last year, which included year-over-year tariff reduction, together with short-term agreements linked to oil production at tariffs below $1 per billion BTU, helped contain variable cost. On the electrical energy side, lower consumption helped offset higher electricity tariffs as the company continued to face the impact of increased emission and distribution costs. The contraction in cement was accompanied by a decline across the remaining business segment. Finally, SG&A expenses decreased 11.7%, mainly due to lower freight and sales tax expenses resulting from reduced sales volumes, as well as a lower impact from salaries and professional consulting fees. As a percentage of sales, SG&A stood at 9.1%, remaining flat year over year. Please turn to slide eight.

Consolidated adjusted EBITDA for the quarter stood at $36 million, while in pesos it reached ARS 43 billion, reflecting a 23.7% year-over-year decline. This decrease was primarily driven by lower EBITDA generation in the cement segment, followed by weaker results in the concrete and railroad segments. In line with this performance, the consolidated EBITDA margin contracted to 20.8%, representing a 315 basis point decline year over year, while remaining broadly in line quarter over quarter, despite the typical cost pressure of the third quarter. In the cement segment, the adjusted EBITDA margin contraction was more moderate, reaching 24.2%, down 129 basis points year over year, mainly due to a softer pricing environment, which, despite showing an improved sequential trend, still lags on the year-over-year basis. Cost on a per ton basis, excluding depreciations, declined 6.5%, supported by lower thermal energy prices and maintenance costs, which partially offset the weaker top line.

The concrete segment saw its adjusted EBITDA margin decline by 1,093 basis points, reaching minus 6.8% versus 4.2% in the first quarter of 2024, as cost controls and higher volumes were not sufficient to offset softer pricing dynamics in a highly competitive environment. In the aggregates segment, the adjusted EBITDA margin improved by 36.6 basis points to minus 16.7%, compared to minus 17% in the same quarter of last year. Although volumes continued to improve during the quarter, the persistent market challenges and an unfavorable product mix continue to weigh on the segment's profitability. Regarding the railroad segment, the adjusted EBITDA margin contracted 920 basis points to 3.4% in third quarter 2025, from 12.6% a year ago. Transported volumes improved slightly, mainly driven by higher shipments of granite aggregates.

However, the ongoing disruption of the railroad line in Bahía Blanca continued to affect longer-haul traffic, primarily grains, gypsum, and frac sand, reducing ton-kilometer transported and consequently revenue generation. These impacts were partially offset by cost reductions. Moving to the bottom line on slide 10, net loss attributable to the owner of the company totaled ARS 8.5 billion for the quarter, compared to a net gain of ARS 27.9 billion in the third quarter of last year. This decline was primarily driven by a lower financial result, reflecting a more moderate inflationary effect and a higher impact from FX exposure, combined with weaker operational performance. However, the decrease was partially offset by lower income tax expenses. On the financial front, the main driver of the year-over-year variation was a reduced gain from the net monetary position, as the inflationary effect of monetary liability was significantly lower than in the same period last year.

In addition, the exchange rate difference had a higher impact due to the devaluation of the peso during the period. As a result, the company reported a net financial loss of ARS 28.7 billion for the quarter, compared to a gain of ARS 16.6 billion for the same period of 2024. Additionally, net financial expenses increased 7.5%, reaching ARS 17 billion, primarily due to higher interest rates in pesos during the quarter. Moving on to the balance sheet, as you can see on slide 11, we ended the quarter with a net debt of ARS 281 billion and a net debt-to-EBITDA ratio of 1.49 times, up from 0.89 times at the end of 2024, while still maintaining a comfortable leverage profile. Cash flow generation from operating activities totaled ARS 32 billion, compared to ARS 84 billion in third quarter 2024. This mainly reflected higher working capital requirements and lower operational results.

On the working capital side, the economic uncertainty during the quarter and the higher interest rate environment increased working capital needs. This was coupled with higher income tax payments since the company did not make advance payment during 2024. On the other hand, inventories decreased during the quarter due to seasonality, as clinker production is minimized during the winter months, while inventory consumption increases. Regarding investment activities, the company allocated ARS 62 billion in the quarter, primarily due to the short-term allocation of the proceeds from the Class 5 bond issuance. On the other hand, CAPEX decreased by ARS 14.6 billion following the completion of the 25 kilogram bagging projects. During the quarter, the company generated ARS 74 billion from financial activities, mainly from the bond issued in July. The Class 5 corporate bond amounted to $113 million, with a two-year tenor and an 8% interest rate.

The new bond was partially subscribed through exchanges with holders of Class 2 and Class 3 bonds. Proceeds will be primarily used to repay the remaining balance of the Class 2 bonds maturing in December. In US dollar terms, net debt stood at $206 million, with valuation close to one year. At the end of the quarter, dollar-denominated debt represents 81% of total debt, while the remainder is 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, I'd please ask you to turn to slide 13. During the third quarter, the volume recovery trend lost momentum, and means unsettling linking to the electoral process. The recovery experienced a temporary slowdown, but they believe the underlying growth driver remained intact.

Looking forward, the recent electoral outcome and the ratification of the government economic plan could provide the stability needed to unlock investment projects that have been on hold, and though many of the economic and political challenges remain in place. The election result brought renewed optimism, which we expect to see reflected in higher activity levels. I would also like to highlight that during the quarter, we began dispatching the new 25 kilogram bags. After hard work and meaningful investment effort, the new bag format hit the market successfully and was very well received by both our customer and final customer. I would like to ask about the outlook for more proposals in Argentina. Loma continues to focus on optimizing performance and being ready to support the country's development and condition normalize. This is the end of our prepared remarks. We are now ready to take questions.

Operator, please open the call for questions. Thank you. We will now conduct a question-and-answer session. If you would like to ask a question, please press star, then one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star, then two if you would like to remove your line. For participants using speaker equipment, it may be necessary to pick up your handset prior to pressing the keys. Once again, star, one on your telephone keypad. We would also like to ask you to please limit your questions to one question and one follow-up, please. If you have additional questions, you may re-queue for those questions, and they will be addressed. Also, please note that Mr. Sergio Faifman will be responding in Spanish immediately following an English translation. Please hold momentarily while we assemble our roster.

The first question comes from Marcelo Fulo with Itaú BBA. Please go ahead. Hi, everyone. Can you hear me? Yes, we can hear you. Yes. Okay, okay. Thank you, guys. So thanks for taking my questions. My question is related to pricing going forward. We saw in the third Q actually prices declined by almost $10 per ton when you look into dollars specifically. You guys mentioned that it was partly explained by the macro environment and due to certain things related to challenge momentum, so on and so forth, but also due to competition. I would like to understand that moving forward, how are you guys seeing the pricing approach for the company? How could you see the evolution for prices in dollar terms moving forward? My second question, just a follow-up regarding capital allocation.

You guys mentioned that these two healthy financial structures and so on and so forth. I'd like to understand how does the management see the opportunity or the likelihood of giving distributions for this year or maybe for 2026? Thank you. Hi, Marcelo. Thank you for your question. Con respecto al precio, la dinámica viene similar a lo que veníamos hablando el trimestre anterior. Regarding prices, the dynamic is similar to the one that we spoke about last quarter. Tal como habíamos hablado en la última call, estábamos previendo aumentar precios por arriba de la inflación. As we talked about during the second Q, we spoke about adjusting prices above inflation this second half of the year. En este quarter hubo una corrección en el tipo de cambio, lo cual obviamente impactó en el precio en dólares.

This quarter we had a correction in the FX that obviously impacted the price in dollar terms. Siguiendo con esta situación de continuar aumentando el precio arriba de la inflación y ya con un tipo de cambio más estable que estamos viendo en los próximos meses, estamos previendo un recupero del precio en dólares para adelante. We expect to see the same tendency going forward, increasing prices above inflation. With a more stable scenario on the FX, probably we will recover prices in dollar terms. Y con respecto a dividendos, and regarding dividends, la verdad es que con la situación macro argentina de los últimos meses, con aumentos de tasas y contexto financiero, given the macro situation in Argentina with the hike in interest rates and the political uncertainty. No hemos avanzado con pago de dividendo estos meses, no estamos previendo hacerlo hasta fin de año.

We didn't advance in paying dividends so far, and we are not expecting to do so in the remaining of the year. Y ya con este nuevo contexto, este macro argentino y financiero, seguramente retomaremos los dividendos el próximo año. With this new macro scenario and from what we expect going forward, we will reassume the thinking about paying dividends next year. Okay, thank you so much, guys. You're welcome. The next question is from Andres Caldona with Citigroup. Please go ahead. Hi guys. Buenas tardes. I would like to ask about early call orders or volumes for the fourth Q. We saw a nice spring for October. I would like to understand what drives that better-than-expected performance and if you see those dynamics still in place for November, December. Thank you. Hi Andres, thank you for your question.

Los volúmenes de octubre, como ya se han publicado, tuvimos una recuperación en el mercado. The volumes for October that were recently published showed a recovery in the market. Nuestra visión es que se encontraron dos elementos. Uno es, obviamente, una posición antes de las elecciones donde la gente paró algunas inversiones y buscó por ahí resguardo en dólar. Our vision is that there were two main drivers there. One was that before the elections, many people held on investing in infrastructure. En octubre hemos visto también que con un aumento del tipo de cambio, algunos proyectos debido a la baja en costo en dólares se han acelerado. And also with the adjustment in the FX, with a lower cost in dollar terms, some other projects are gaining pace. Pero viendo los volúmenes de octubre y inicio de noviembre, somos optimistas con el volumen para los próximos meses.

Seeing the volumes of October and November so far, we are optimistic looking ahead. Obviamente, en la medida que la estabilidad en el tipo de cambio, la baja en la tasa de interés y el contexto macro se estabilice, eso va a permitir muchas inversiones comenzar y eso va a traccionar para nuestro mercado. If we continue this scenario of low rates and stable FX and a more stable macro, that should give more dynamic to investment projects and increase the level of activity. Y seguramente, como ya hay algunas noticias, esto se sumará a algunas obras públicas que ya están comenzando y que seguramente van a comenzar a salir también. As is public in recent news, there are also some public works going on that are going to add more volume and increase the level of activity as well. Thank you, guys. You're welcome.

This concludes our question-and-answer session. I would like to turn the conference back over to Diego Jalón for closing remarks. Hi, thank you very much, everyone, for joining us this morning. It's always a pleasure. We are here if you have any other concerns or questions regarding the Q. We will see you again in the upcoming quarter. Thank you very much. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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