Good morning, and welcome to the Loma Negra Fourth Quarter 2023 Conference Call and Webcast. [Operator Instructions]. Also, Mr. Sergio Faifman will be responding in Spanish immediately following an English translation. [Operator Instructions]. Please note, this event is being recorded. .

I would now like to turn the conference over to Mr. Diego Jalón, Head of IR. Please go ahead, Diego. .

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 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 begin my presentation with the discussion of the highlights of quarter, and then Marcos will take you through our market review and financial result. After that, I provide some final remarks and then we will open the call to your questions. .

Starting with Slide 2. I'm delighted to share with you our performance for the single quarter of the year. Despite in current, challenging resulting for the political transition and involving economic environment, which impacted second semester activity level.

The industry concluded the year with dispatch volume that rank only behind the record year of 2022. .

In this context, Loma has once again demonstrated its resilience, delivering another solid set of results despite the decrease in our top line, which reaches ARS 99 billion marking a decrease of 13.2%. This decline was primarily due to the volume contraction in our core segment.

Adjustment EBITDA stood at $61 million for the quarter or ARS 22.7 billion. The year-on-year comparison is affected by the sale of noncore assets for $19 million in the fourth quarter of 2022. Excluding this effect, EBITDA decreased by 25.8%. .

Consolidated adjustment EBITDA margin for the quarter reached 22.8%, contracting by 389 basis points once we eliminate [ tax ] there will be a result for the base of comparison. On the other hand, the U.S.

dollar EBITDA per ton stood at $39 for the quarter, almost flat year-on-year once we subtracted the asset sale and improving by 7% in secondary basis. .

Looking to our annual figures in 2023, we reached a solid EBITDA of $252 million with an EBITDA margin of 23.8%. On the financial side, we used our Class IV domestic bond. [ Throughout ] the year, we have successfully carried out [ IV ] local bond issuance, taking advantage of the favorable momentum for solid corporate credits. .

During the quarter, we can sell all the remaining cross-border short-term debt, reaching a net debt of $174 million. .

Please turn to Slide 4 for a review of our ESG highlights for the year. We take great satisfaction in realizing a new addition of the Loma Negra's sustainability report. I mean to share our -- and dedication to sustainable development with all stakeholders. .

Regarding the environmental aspect our total greenhouse gas emission intensity Scope 1 and 2 stood at 527.36 kilograms of CO2 per ton of cementitious material, increasing 0.35% year-on-year due to the variation of the clinker stock compared to 2022. .

clinker factor; thermal efficiency; electric efficiency; and fuel mix. .

In pursuit of this goal, we formed inter alia, an interdisciplinary teams with a proposal of continuing to work on a portfolio of the idea, solution and investment required to achieve the reduction goal set for 2030. .

On the Social side, we are convinced that through a strategic partnership we can transform a reality to ensure a more inclusive future. We maintain implementation of our program in different territories of the country, benefit more than 80,000 people. .

Guided by our principle, we are, all Loma, we held the first diversity and inclusion week and we reached more than 50,000 hours of training for our employee, specifically in training of diversity, equity and inclusion topic, which is 648 hours of training. .

Regarding the Governance aspect, we continue training our people of the company Integrity Program where we cover 100% of our employee and reinforcing the commitment to ethical and transparency.

We held the Compliance Week for the second time which was an opportunity to reinforce message and share content related to ethical and integrity issue, antitrust, ethic hotline, ethical behavior and cybersecurity. With different tools and mechanisms we reached more than 800 employees. .

We continue to involve and travel the path of commitment to the selling share that the context improves and us. It is a path that we revolve through in an ethical, responsible and sustainability manner. This report reflects such path. I invite you to read it to now the most outstating results of our company. .

I will now hand off the call to Marcos Gradin, who will walk you for our market review and financial results. Please, Marcos, go ahead. .

Thank you, Sergio, and good morning, everyone. Please turn to Slide 6. As you can see on the upper left chart, the most [ recent ] estimates indicate a negative performance of the economy for 2023 of around 1.6%.

In the same sense, the market expectation report from the Central Bank signals a negative performance for 2024, showing a decrease of 3% and a recovery in 2025. .

When we dive into the numbers for our industry, we can see that after a positive October, the construction activity indicator shows a significant drop in the last 2 months of the quarter, deepening the drop in January.

Following this trend, [ cement dispatches ] show a double-digit decrease in November and December and a sharp drop in the first month of 2024. .

After several months of election process volatility, sales in the national cement industry are being affected by the political transition and the consequent effects of tighter economic policies.

The industry's bulk segment dispatches took a hit due to lower level of activity in the fourth quarter, decreasing by 12% year-on-year, while [ bagged segment ] post a moderate construction of 5%. .

When looking at the breakdown by dispatch more for the quarter, bulk shipments represent 44% of the total dispatches in line with the figure reached for the whole year and 2 percentage points above the fourth quarter of 2022.

After the conclusion of the electoral year, it will be necessary to dispel the uncertainty about the economic direction and find a certain political balance to enable our activation of the industry and lay the foundations for a stage of [ genuine ] growth. .

Turning to Slide 7 for a review of our top line performance by segment. The fourth quarter top line show a decrease of [ 13.2% ], mainly attributed to the decline in the Cement segment, also followed by the other businesses.

The cement, masonry segment, and lime segment was down 16% with volumes contracted by 10.1% year-on-year, mainly due to the impact of the economic environment on bulk mode dispatches. Bulk cement sales also decreased following the trend of previous quarter. .

Lower volumes were coupled with softer biodynamic which despite adjusted for inflation experienced a decline due to elevated monthly inflation figures and the timing of the price adjustments.

Concrete revenues decreased by [ 12.3% ] in the quarter, mainly due to the 17.5% decrease in dispatches, major projects, which are the market target for our concrete operation experienced a slowdown due to macroeconomic uncertainty. While public works enter standby mode after the elections awaiting future definitions. .

Aggregate segment showed a decrease of 9.5% with sales volumes down 12.3%, partially offset by a good price performance. In the same way, Railroad revenues decreased by 10.5% in the quarter.

Transported volumes were down by 9%, primarily affected by the lower level of activity in the construction sector, which impacted our main cargo shippers, especially in Aggregates. Additionally, a storm that hit Bahía Blanca in December temporarily knock out of service, the 2 plants from which we transport chemicals to Buenos Aires.

For the FY 2023, consolidated revenues were down 6.3% to ARS 422 billion from ARS 452 billion in 2022. The cement volumes contracted by 4.5% from the record year of 2022. .

Moving on to Slide 9. Consolidated gross profit for the quarter declined 14.3%, bigger margin contraction of only 36 basis points to 26.2%. Mainly due to the cost improvements in the cement segments and lower depreciation.

Regarding the Cement segment, the reduction of energy inputs were primarily driven by lower consumption of thermal energy per ton, coupled with a decrease in natural gas prices. In the same sense, the cost of electrical energy improved as a proportion of hydraulic energy which has a lower cost, increase in the country's electrical generation metrics.

.

Finally, while SG&A expenses remained almost flat with a variation of only 0.1% year-on-year as a percentage of sales, we saw a year-over-year increase of 132 basis points, reaching 10% due to the decrease in the top line. .

For the fiscal year 2023, gross profit was down 13.2% with a margin contraction of 192 basis points. .

Please turn to Slide 10. Our adjusted EBITDA for the quarter stood at $61 million, reaching a very robust figure amidst a challenging environment. In pesos adjusted EBITDA was down 44.7% in the quarter, reaching ARS 22.7 billion with a consolidated EBITDA margin of 22.8%.

As mentioned earlier, the year-on-year comparison is affected by a noncore asset sale in the fourth quarter of 2022. .

Eliminating that effect, the adjusted EBITDA in pesos was down 25.8%, with the margin contracting by 389 basis points in line with previous quarterly results. Cement segment adjusted EBITDA stood at 26.6%, contracting 217 basis points, excluding the sale of assets.

The cost improvement that I mentioned before, mainly in energy inputs partially offset the lower top line performance. .

In a per ton basis, EBITDA reached [ $39 ] per ton with almost no variation year-on-year once we subtract the asset sales and improve by 7% from the previous quarter. Concrete adjusted EBITDA decreased ARS [indiscernible] million compared to fourth quarter of a year ago. With a margin contraction of 129 basis points, reaching 1.5%.

Despite the cost and interest control, it couldn't fully offset the lower top line performance. .

The adjusted EBITDA margin of Aggregates contracted to 14.2% from 25.9% in the fourth quarter of 2022, mainly due to higher sale cost and the effect of lower volumes, partially compensated by a positive price performance. .

Finally, the adjusted EBITDA margin of the Railroad contracted 922 basis points to minus 4.2% in the fourth quarter from 5.1% in the fourth quarter of 2022, principally due to higher costs, coupled with lower transported volumes. For the full year, 2023 adjusted EBITDA, which the figure of USD 252 million. .

Moving on to the bottom line on Slide 12. This quarter, we posted a net loss attributable to owners of the company of ARS 19.8 billion compared to net profit of ARS 22.7 billion in the fourth quarter of 2022.

The higher total financial cost due to [ December shut], devaluation of the Argentinian pesos, along with the sale of the noncore assets in the fourth quarter of 2022, are the principal reasons for devaluation.

Total net financial costs stood at ARS [13.3] billion this quarter from a total financial gain of [ ARS 1.2 ] billion in the same quarter last year, mainly due to the impact of the devaluation of the peso in the exchange rate difference, partially offset by a gain in the net monetary position. .

In the same sense, we had an increase in the financial expense due to higher debt position.

For the full year, net income attributable to owners of the company increased 70.7% year-on-year to ARS 10.3 billion from ARS 6 billion in fiscal year 2022, mainly as a result of a lower total net financial cost, coupled with a lower tax position that compensated a lower operational result. .

Moving on to the balance sheet. As you can see on Slide 14. We ended the quarter with a cash position of ARS 6.7 billion and total debt of ARS 147.4 billion in this quarter. Consequently, our net debt-to-EBITDA ratio stood at 1.4x compared to 0.37x at the end of 2022.

Our operation cash generation stood at ARS 26.2 billion, where the decrease in the net profit adjusted to reconciled to net cash provided by operation activities was partially compensated by a positive effect of the working capital, mainly due to lower income tax advances. .

Regarding capital expenditures, we allocated ARS 18.2 billion, mostly for maintenance CapEx, an ongoing project of adapting our dispatch facilities to use 25 kilograms bags. During the quarter, the company used cash in financial activities for ARS 41 billion, mainly for the repayments of borrowings and interest.

We also issued a Class IV bond that along with short-term borrowings, partially offset these effects. .

In dollar terms, our total debt reached $182 million, standing our net debt at $174 million at the end of this quarter, with a decrease of $41 million during the quarter. During this period, we canceled all the remaining short-term U.S. dollar cross-border debt, extending the average generation and reducing the financial cost.

Now in 2024, we only have maturities at [ relative ] pesos. Breaking it down by currency, the dollar denominated debt represents 76% of the total debt, while the rest is in pesos. .

Additionally, as we mentioned before, during the quarter, the company issued its Class IV domestic bonds, denominated in U.S. dollars for a total amount of $10 million with maturity in the second quarter of 2026, and accruing an interest rate of 6% per year.

2023, we paid approximately USD 120 million in dividends, which represents $1 per ADR, similar to what we paid in 2022. .

Now for our final remarks, I would like to hand over the call back to Sergio. Thank you. .

Thank you, Marcos. Now to summarize the presentation. I please ask you to turn to Slide 15. We are very proud of the result achieved by Loma in 2023, despite the lower volume of the fourth quarter that were more affected by the end of the period due to the political transition.

We must lose seeing that 2023 was the second best year for the industry in terms of volume, only behind the record achieved in 2022. .

Thirdly, the electoral process and the subsequent change in administration have induced uncertainty, impacting the level of activity industry, stakeholder are cautioned and awaiting the government's initial action and the stabilization of key economic indicators.

Despite the significant drop in activity level dividends in the first months of the year, we remain optimistic but are aware of that the path to recovery we winning and full of the challenges. .

Argentina has great growth potential, which will be unlocked if the country manages to start moving along to right path. In that scenario, Loma has the capacity to support and bolster the country development, fulfilling role of industry leaders. .

Finally, I would like to thank all our employees for the commitment they have shown throughout the year. I also want to express gratitude to the rest of our stakeholder for remaining close to us for another year. And broadly together, we can face any change that this new year might bring. This is some 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]. Our first question is from Daniel Rojas of Bank of America. .

Can you hear me?.

Yes, sir. We can hear you. .

Looking at the contraction in margin, the 389 basis points you mentioned that excludes the asset sale.

Could you please give a little bit more details on what's behind this? What factors lag behind the lower margin? And what we should expect going forward?.

Daniel, thank you for your question. I will respond to that, that margins are not descending. Obviously, when compared year-on-year, they are contracting because of the lower volumes and the hitting on the top line. But if you saw it on a sequential basis, quarter-over-quarter, margins are stable. But the principal factor, honestly is lower volume. .

Okay. And if I may follow up. Now that the new President has been in office for a few months, can you give us some color on how you're seeing activity going forward, is your team already on board, do you see a faster or lower transition that you might have expected. We just want to get an idea of how we should expect the year to roll out. .

Daniel, obviously, the year and the first month are being hit. Yes, the volume is in the level of 20%, 25%. We expect the upcoming months to continue more or less on this space. But then for the second half of the year, economy began to pick up, and that's where we are going to see a pickup on cement volumes.

But obviously, the number is going to be [ negative ] for the year. .

[Operator Instructions]. Our next question is from [ Jorge Viñas ] of Latin Securities. .

The question is about the pricing environment in the current recessionary scenario, given the deepening of the contraction in dispatches, how is the pricing evolving and what should we expect for the next couple of quarters. .

[Interpreted] Regarding prices, since December [indiscernible], we are above inflation in the enterprising dynamic..

Our actual price hit was hit above the one we had in December..

And we expect this trend to continue even though if we see some this quick movement of the effects, we will act accordingly. .

And this concludes our question-and-answer session. I would like to turn the conference back over to Diego Jalón for any closing remarks. .

Thank you for joining us today. We truly appreciate your interest in our company. Allow me to remind you that we issue our -- certain issuance of our sustainability report and it's available on our website, and we invite you to have a look at it. .

As always, we look forward to meeting you again in our next call. And in the meantime, we are available for any questions that you may have. Thank you, 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.].