Displaying items by tag: Loma Negra

Argentina: Loma Negra has resumed operations at its Olavarría cement plant in Buenos Aires Province. Noticias Financieras News has reported that the company informed the Ministry of Labour that it had reached an agreement with the AOMA mining union. The union represents employees of limestone supplier Minerar, who demanded to be classed as cement workers for purposes of union representation and pay. Loma Negra accepted the strikers’ claims, and paid a total of US$24,000 in retroactive salary installations for the period October to December 2020.

Argentina: A dispute between a supplier and its union has caused Loma Negra to switch off two kilns at its Olavarría cement plant. The Clarín newspaper has reported that the argument is between Minerar, which provides the plant’s raw limestone, and the Asociación Minera Obrera Argentina (AOMA), which represents miners’ interests. The union says that miners are underpaid. They receive US$245/yr less than cement plant workers.

The producer said, “It is the leading Argentine cement company, with approximately 45% of total sales in the country. This shortage will impact the country's economy, which had been recovering after the pandemic." The union rejected a mandatory conciliation on 3 December 2020. Negotiations began in October 2020.

Argentina: InterCement subsidiary Loma Negra’s nine-month net sales for the period ending 30 September 2020 were US$321m, down by 23% year-on-year from US$416m. Its net profit doubled to US$95.3m from US$44.9m.

Chief executive officer (CEO) Sergio Faifman said, “We feel very satisfied with the robust position with which we concluded the third quarter of 2020. We have improved our operational results with margins expansion on the back of a continuing sales volume improvement coupled with effective cost and price management.

Faifman continued, “additionally, we seamlessly executed the sale of our Paraguayan operation, an excellent deal in terms of value generation and timing. We optimised the proceeds from the transaction, creating value for our shareholders and, at the time, strengthening our already robust financial situation.” He added, “In the quarter, cement demand in Argentina continues to operate at two speeds. On one side, our bagged cement segment has taken a strong recovery path of 18% year-on-year business growth, mostly due to household and retail demand. By contrast, the bulk cement segment, as well as concrete and aggregates, are still affected by the very low levels of larger private and public works, the execution of which is still hampered by the coronavirus lockdown and its effects.”

The company said that its L’Amali cement plant upgrade – a “key element of our long-term strategy” – is on track, but that uncertainties around the impacts of the coronavirus outbreak meant that the new line would not necessarily be commissioned when scheduled in early 2021.

Paraguay: Argentina-based Loma Negra has sold its 51% stake in Yguazú Cementos. The El Cronista Comercial newspaper has reported that the proceeds of sale of the 0.8Mt/yr installed cement production capacity subsidiary will go towards paying off Loma Negra’s debts. The company said, “Loma Negra’s objective is to seek and execute projects with high potential. For this reason, after having started marketing operations in Paraguay in 2000, built and operated the factory since 2013 and reached high standards of production and profitability, we have finally decided to finalise its sale.”

Yguazú Cementos sold 260,000t of cement in the first half of 2020, down by 6.8% year-on-year from 267,000t in the first half of 2019. This generated revenues of US$25.4m, up by 39% from US$18.3m and constituting 12% of Loma Negra’s total sales of US$212m over the period. The company valued the asset at US$80m on 30 June 2020. The buyer is a Paraguayan company reportedly connected to remainder shareholder Intercement.

Yguazú Cementos’ 0.4Mt/yr Ascunsción cement plant in Capital District and 0.4Mt/yr Villa Hayes cement plant in Presidente Hayes Department supplied 40% of Paraguay’s cement demand in 2019.

Argentina: Loma Negra’s first-half net profit declined by 68% year-on-year in 2020 to US$14.2m from US$44.4m in the 2019. Sales fell by 30% to US$215m from US$306m. The company said that business was “impacted by the increasing complexities of the Covid-19 pandemic,” but that a strong recovery in bagged cement sales beginning in May 2020 was an indicator of general growth to come in the second half of the year.

Argentina: Loma Negra’s sales of cement, masonry and lime fell by 26% year-on-year to 1.13Mt in first quarter of 2020. The decline was driven by the coronavirus lockdown in Argentina, where the subsidiary of Brazil’s InterCement has most of its sales. Concrete and aggregate sales volumes declined also. The company’s new revenue dropped by 29.6% to US$115m and its adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 17.9% to US$38.6m. However, the company’s accountant adjustment for use in so-called ‘hyperinflationary economies’ made a negative impact on these figures. With this adjustment removed both revenue and earnings reportedly rose in the first quarter.

“By the end of the first quarter the coronavirus broke out, bringing additional challenges to the already adverse background,” said Sergio Faifman, Loma Negra’s chief executive officer (CEO). He added that cement demand in Argentina nationally contracted by around 29% year-on-year in the first quarter of 2020.

The cement producer temporarily suspended its production facilities and its L´Amalí Expansion project in late March 2020 due to the government lockdown. Production and dispatches of cement were restarted in early April 2020 following the implementation of new sanitation protocols. The company has now resumed working on its upgrade project at L´Amalí.

Argentina: Loma Negra plans to restart cement production at its plants depending on local demand. It is currently supplying public infrastructure projects from existing stocks, according to Infoeme. The subsidiary of Brazil’s InterCement stopped production following a national quarantine due to the coronavirus outbreak in late March 2020. However, the building materials producer has been included by the government on a list of essential activities so it can resume operation when it wants.

Argentina: Loma Negra’s total comprehensive income in 2019 was US$61.8m, up by 3.7% year-on-year from US$59.6m in 2018. Its revenue fell by 15% to US$147m from US$173m in 2018. The company said that this was due to decreased demand in Argentina, where its cement, masonry and lime sales declined by 11% year-on-year to 1.28Mt of products from 1.44Mt in 2018, with bulk sales falling further than bagged. Profit growth was hampered by non-recurrent costs from cost-control and streamlining initiatives.

Loma Negra CEO Sergio Faifman said, “Argentina's business suffered more in 2019 than previously expected, however we were able to thrive and present results that we can feel proud of.” He lobbied the new government to adopt policies to ‘re-establish financial stability and economic growth.’

An expansion to Loma Negra’s 1.7Mt/yr integrated L’Amali plant is set to bring the plant’s capacity to 2.4Mt/yr when commissioned in mid-2020.

Cementos Molins’ financial results took a tumble this week, in part due to the poorly performing Argentinian economy. A decrease in sales in Mexico was also to blame but rampant inflation in Argentina caused the Spanish cement producer problems.

Cementos Molins owns a 51% stake in Cementos Avellaneda, with Brazil’s Votorantim Cimentos owning the remainder. Molins took pains in its financial report to point out that the aggregate rate of inflation had been 109% in mid-2018. Accordingly, its income and earnings in 2018 would have been much better if the economy had been in a better state. As it was, its income fell by 24% year-on-year to Euro134m and its earnings before interest, taxation, depreciation and amortisation (EBITDA) dropped by 30% to Euro30.3m. Adjusted for negative inflationary effects these should have risen by 43% and 31% in 2018.

Graph 1: Construction activity in Argentina (year-on-year growth, %). Source: El Instituto Nacional de Estadística y Censos de la República Argentina (INDEC).

Graph 2: Monthly changes in cement despatches in Argentina (year-on-year growth, %). Source: Asociación de Fabricantes de Cemento Portland (AFCP).

The other major local producers, Loma Negra and LafargeHolcim Argentina, are owned by Brazil’s InterCement and Switzerland’s LafargeHolcim respectively. Both companies are due to present their financial results later this week but the signs were not looking good earlier in the financial year. In its third quarter results Loma Negra said that the general economy was dragging on cement demand. Construction activity data from El Instituto Nacional de Estadística y Censos de la República Argentina (INDEC) showed that growth nosedived in mid-2018. This corresponds roughly with falling year-on-year cement despatches. Loma Negra noted that the depreciation of the Argentine Peso was hitting its bottom line and that its cement sales volumes dropped by 6.2% to 1.61Mt in the third quarter of 2018 from 1.72Mt in the same period in 2017. Despite this, its net revenue grew by 42.3% in the nine months to the end of September 2018.

Understandably, much of the talk in Loma Negra’s third quarter earnings call was about the effects of local currency depreciation with questions about how the expenditure for its L’Amalí plant expansion project was split between different currencies or how fuel costs were being affected. More revealing though was information about Loma Negra’s plans to reduce production capacity as national demand falls. Chief executive officer (CEO) Sergio Faifman said that the production cost at L’Amalí would be US$15/t less than the national average and that its Olavarría and Barker integrated plants would be first in line for production cuts given their closeness to L’Amalí.

Holcim Argentina reported ‘significant’ growth until May 2018 in its third quarter report. From here its sales fell and it expected zero growth for the year as a whole. It blamed this on the state of the general economy, the lower attractiveness of mortgages in the residential sector and problems with infrastructure project financing. Its sales volumes of cement rose by 6.4% year-on-year to 2.54Mt in the first nine months of 2018 from 2.39Mt in the same period in 2017. Holcim Argentina also has an upgrade project underway, at its Malagueño cement plant near Córdoba. Once completed by the end of 2019, the project is expected to increase the unit’s production capacity by 0.73Mt to over 3Mt/yr.

The problems facing the Argentine cement producers are clearly due to the poor general economy. The government took a US$56bn loan from the International Monetary Fund (IMF) in mid-2018 to shore up the situation. Since then the Argentinean Peso seems to have stabilised against the US Dollar and inflation has settled. At this point the question is whether this is the bottom of the economic trough. The other thing to note is that Argentina has faced economic problems at the same time as Turkey. Although Turkey has a much bigger cement industry, both countries are prominent cement producers in their regions.

The sad thing though is that the local cement market was facing shortages in late 2017, producers were investing in new production capacity and Loma Negra launched an initial public offering (IPO). All of this growth in the cement industry has been jeopardised by the general economy. Let’s hope it rebounds soon.

Forget the news stories about poor markets in Colombia and Brazil. Argentina is riding a construction boom right now. Local producer Loma Negra recently ran an initial public offering and it picked a good time to do it. It aimed to generate up to US$800m from the flotation and in the end it raised over US$1bn. Good news for its Brazilian owner InterCement no doubt, which was last reported as aiming to sell a 32% stake in the company in order to cover its debts. More cheer must have followed from Loma Negra’s third quarter results this week. Its cement sales volumes rose by 9% in the latest quarter to 1.72Mt due to expanding local construction activity.

Graph 1: Cement production and consumption in Argentina Q1 – 3, 2008 – 2017. Source: Asociación de Fabricantes de Cemento Portland (AFCP).

As Graph 1 shows its experience mirrors the wider industry. Cement production rose by almost the same rate for the industry as whole, by 10% year-on-year to 3.19Mt for the quarter, according to Asociación de Fabricantes de Cemento Portland (AFCP) data. For the nine months as a whole production has also risen by 9% to 8.7Mt. This figure is the third highest in the last decade since 2008. Production peaked in 2015 before dropping a major 10Mt following a subdued construction industry in the wake of devaluation of the Argentinean Peso in late 2015 and early 2016. At the time LafargeHolcim, the operator of Holcim Argentina, also blamed the negative influence of neighbouring Brazil’s own financial woes. The economy has bounced back giving the country’s its highest nine month cement consumption figure, 8.8Mt, in the last decade.

Earlier in the year LafargeHolcim said it was importing 0.25Mt of cement into Argentina between May 2017 and April 2018 because it couldn’t meet local demand from its own plants. Given the over-abundance of clinker in the world one might be forgiven for being sceptical about this claim. Bolivia’s Itacamba announced it was also exporting cement to Argentina this week. However, the other point to note from the graph is that consumption has been about 90,500t higher than production so far in 2017. This is an envious position for local producers to be in. One more striking feature that sticks out from the graph above is the undulating curve than both production and consumption has. The Argentinean economy has been through the ringer in recent years and this shows in the ups and downs of the figures.

From the perspective of the three major domestic producers, Loma Negra’s sales revenue rose by 53.9% year-on-year to US$620m in the first nine months of 2017. Its adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by a whopping 73% to US$157m. Cementos Avellaneda, owned by Spain Cementos Mollins and Brazil’s Votorantim, reported similar good news with its overall results boosted by the Argentine market. Its sales revenue in the country rose by 28.3% to Euro130m and its EBITDA rose by 59.5% to Euro32.4m. Although Mollins did make the point that inflation had been particular problem in Argentina, although its impact had been ‘greatly’ outweighed by price rises. LafargeHolcim has had its problems globally so far in 2017 but Argentina hasn’t been one of them. Its operations in the country have been propping up the group’s Latin American results each quarter so far in 2017. Despite being one of its smaller regions by sales revenues, its sales and earnings delivered some of the group’s highest growth in the third quarter of 2017.

In this kind of environment new production capacity can’t be far away. Sure enough Cementos Avellaneda plans to increases the capacity of its San Luís cement grinding plant by 0.7Mt to 1Mt/yr by the second quarter of 2019. US$200m has been earmarked for the project.

So, great news for Argentina and proof that poor markets can turn around. The Brazilian cement association SNIC reckoned in October 2017 that the rate decline of cement sales was slowing, suggesting that the bottom of the downturn was in sight. On the evidence of the current situation in Argentina once the market does revive, South America will be the place to watch.