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Operator: Good morning, and welcome to the Loma Negra Second Quarter 2023 Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask question. Also Mr. Sergio Faifman will be responding in Spanish immediately following an English translation. [Operator Instructions] Please note that, this event is being recorded. I would like now to turn the conference over to Mr. Diego Jalon, Head of IR. Please Diego, go ahead.

Diego Jalon: 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 filings 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: Thank you, Diego. Hello, everyone, and thank you for joining us this morning. I would like to begin my presentation, with a discussion of the highlights of the quarter, and then Marcos will take you through our market review and financial results. After that, I will provide some final remarks and then we will open the call to the questions. Starting with slide 2, I’m very pleased to present you the second quarter as we are highly satisfied, with the results achieving during this period. The macroeconomic struggle and the increase in political uncertainty as we approach the presidential election has started to affect the level of economic activity. In this context, the contraction activity at the cement industry remain resilient, with sale volume tracking second for the second quarter in historical terms despite showing a decrease year-on-year.

Moreover for first six months of the year, set a new record slightly surprising the mark reached in 2022. Our top line for the quarter reached ARS51 billion decreasing 6.5%, primarily due to the contraction of our core segments Cement, partly compensate for the good performance of Concrete, reflecting the positive momentum of the bulk dispatch model. Our adjusted EBITDA for the second quarter stood at $63 million, flat from the second quarter 2022. When MICHELIN pesos showed a decrease of 26.1% compared the same quarter last year adjustment by inflation. Consolidated margin suffered some compression, primarily due to decrease in the Cement segment and the increase in participation in the top line of Concrete with lower margin. Despite the contraction, the margin for the Cement segment continued to rank among the world-class EBITDA margin in the industry.

In this sense the US dollar EBITDA per ton stood at $36.8 for the quarter, 1% above last year second quarter. This set of results allow us to keep on maximizing value to our shareholders. In this sense, this quarter we announced two dividend payments aiding the one we distribute in January, since the total amount of approximately $120 million, representing approximately $1 per ADR. And we achieved — we always maintain a strong balance sheet with a low net debt ratio stood at 0.82 times. I will now hand off the call to Marcos Gradin, who will help you, through our market review and financial results. Please Marcos, go ahead.

Marcos Gradin: Thank you, Sergio. Good morning everyone. Please turn to slide 4. As you can see on this slide the last market expectation report from the Central Bank worsened their estimates for 2023, reflecting the increase in economic uncertainty and a lower level of overall activity. While the construction activity shows mixed results for the first half of 2023, the cement national industry sales show resilience. Despite posting a decrease of 1.9% for the quarter, this second quarter is the second best in history only behind second quarter of 2022. And the cumulative figure for the first half of this year is record for a semester for the whole industry. Although, still in high figures, bulk cement is a dispatch mode showing contraction reflecting lower demand from the retail sector.

On the other hand, bulk cement continues to show solid growth, underpinned by Concrete per user demand boosted mainly by private infrastructure projects and public works. In this sense, when seeing the breakdown by dispatched mode, bulk segments continue to gain tariff, showing a participation of 45% against 43% in second quarter of 2022 and reaching a record high for the quarter. Even considering the strong resilience of the Cement industry, the lower activity level of the economy in the recent months together with a high inflation, reflects the effect of the economic challenges coupled with an increased uncertainty driven by the upcoming elections. For the second half of the year, we expect volumes to be slightly below the 2022 figures, but to remain in robust shape in historic terms.

Turning to slide 5, for a review of our top line performance by segment, top line was down 6.5% in the second quarter where the good top line performance of Concrete and Aggregates partially offset the decline in Cement and Railroad. Cement, masonry and lime segment was down 12.4%, with volume contracting 3.6% year-on-year, mainly due to a decline in bagged cement sales, covered by softer price dynamic that, even moving with inflation, showed a decrease due to higher monthly inflation figures and price adjustment timing. Concrete revenues strongly increased 26.6% in the quarter. Volumes were up 14.8% in line with the strong momentum of bagged cement coupled with good pricing performance. Private construction and public works especially, urban pavement and routes projects in the Province of Buenos Aires boosted this purchase.

Aggregate segments show an expansion of 1.8% with a sales volume down of 8.3% mostly due to operational setbacks that affected the dispatches compensated with strong price performance. On the other hand Railroad revenues decreased 13.4% in the quarter year-on-year. Transported volumes were down 9.6%, affected by the decrease in transported volumes of fracsand and Aggregates. The lower volumes of fracsand also affected the average price per ton as it is by far the products with longer average transported distance. Moving on to slide 7, consolidated gross profit for the quarter declined 21.1% year-over-year with margin contracting by 437 basis points to 23.7%, mainly impacted by a lower price performance and sales volumes of our core segment, partially compensated by better performance in Concrete.

Regarding the Cement segment, a decrease in electrical energy inputs and lower depreciations, helped to mitigate the gross profit compression. Also, the increase in sales volumes in segments with lower margins in this case Concrete, also contributed to a compression of the consolidated figure. Finally, SG&A expenses as a percentage of revenues increased 68 basis points to 9.4% from 8.7% in the second quarter of 2022. Please turn to slide eight. Our adjusted EBITDA for the quarter stood at US$63 million, remaining flat from the same quarter a year ago and maintaining very strong figures. In pesos, adjusted EBITDA was down 26.1% in the quarter, reaching ARS11.7 billion with consolidated EBITDA margin of 22.9%, contracting 608 basis points year-on-year, mainly affected by Cement margin contraction and the higher participation in the top line of Concrete, a segment with lower margins.

Cement adjusted EBITDA margin stood at 27.1%, contracting 536 basis points, mainly affected by lower top line performance. On a per ton basis, EBITDA reached US$36.8 per ton, increasing 1% from last year’s second quarter. Concrete adjusted EBITDA increased ARS 287 million compared to second quarter of 2022, mainly explained by the positive price performance and higher volumes. Margin expanded 580 basis points, reaching 2.7%. Aggregates adjusted EBITDA decreased ARS62 million this quarter from ARS138 million in second quarter 2022, reaching a margin of 5.3%. The segment’s positive momentum encountered some operational setbacks in the quarter, which momentarily affected dispatches. Finally, Railroad adjusted EBITDA decreased ARS125 million to ARS42 million for the quarter, with a margin of 0.8%, mainly explained by lower transported volumes of fracsand and Aggregates, that put pressure on costs and the incidence of the decrease in fracsand in the average transported distance that negative impact the average price per ton.

Moving on to the bottom line on slide 10. This quarter, we posted a net profit attributable to owners of the company of ARS2.5 billion, compared with ARS5.4 billion on the second quarter of last year, where the lower operational result was coupled with higher financial costs. Total net financial costs stood at ARS3 billion in this quarter, from a total financial cost of ARS0.7 billion the same quarter last year, mainly due to an increase in financial expenses related a higher debt position and a higher negative effect of the exchange rate variation, partially compensated by a positive effect as a result on the monetary position. Moving on to the balance sheet. As you can see on slide 11, we ended the quarter with a cash position of ARS24.1 billion and a total debt of ARS71.7 billion.

Consequently, our net debt-to-EBITDA ratio stood at 0.82 times, compared to 0.37 times at the end of 2022. Our operating cash generation stood at ARS11.9 billion, while the increase in the net profit adjusted with noncash effects coupled with a positive effect of the change in operating assets and liabilities explain the positive valuation against second quarter 2022. Regarding capital expenditures, we allocated ARS3.1 billion, mostly for maintenance capital expenditures. During the quarter, we increased our debt in US$77 million standing our net debt at US$186 million at the end of this quarter. Breaking it down by currency, the total denominated debt represents 53% of the total debt while the rest is in pesos, and a not significant part in euros.

As we mentioned before, in the quarter we announced dividends payments for ARS 35.9 billion. The one announced in May, was paid in kind through Argentine T-bills, while the second one was announced in June, and the payment was made effectively in July, and it was paid in cash. So far this year, we have paid approximately US$120 million, which is equivalent to approximately $1 per ADR. Additionally, during the quarter the company issued its Class 2 domestic bond denominated for a total amount of US$71.7 million, with maturity in December 2025 and accruing interest at a rate of 6.5% per year. The response for the market — from the market was very positive and ratified the investors confidence in, Loma. Now for our final remarks, I would like to hand the call back to Sergio.

Thank you.

Sergio Faifman: Thank you, Marcos. Now to finalize the presentation, I please ask you to turn to Slide 14. To finalize this presentation, I would like to highlight a few final takeaways. We managed to achieve a solid result despite the prevailing political and macroeconomic challenge, during the period that are already affecting the economic, as indicated the last monthly estimate of economic activity published by the index. As we approach the presidential election, we are aware of the growing political uncertainty, which adds complexity to the business environment. Nevertheless, the industry remained resilient and 2023 will provide end up by the second best year in history, in terms of sale volume. This robustness coupled with our strategic approach, put us in good shape to navigate through this obstacle and maintain a strong performance.

We have reached significant milestone reflecting the hard work and dedication of our Argentine teams. We extend our gratitude to our employees, customers, business partners and the community where we operate for their ongoing support, and we look forward to a prospered and sustainable future. This end of our prepared remarks. We are now ready to take a question. Operator, please open the call for questions.

Operator: Thank you. We will now conduct a question-and-answer session. [Operator Instructions] Also please note that Mr. Sergio Faifman, will be responding in Spanish immediately following an English translation. [Operator Instructions]. The first question comes with Rodrigo Nistor with Latin Securities. Please go ahead.

Unidentified Analyst: Hi. This is [indiscernible] filling in for Rodrigo Nistor. Thanks for the opportunity of asking questions. I have two. Given the industry’s recent deceleration, what are your perceptions for the demand in the second half of the year, especially regarding the balance between bulk and bulk sales? That’s the first one. Well, the second one is additionally considering election year and ongoing inflation what do you expect in terms of pricing and cost pressures and what continue to offset this negative impact?

Sergio Faifman: Thank you for your question. Regarding volumes for the next of — for what remainds of the year, we are expecting a slight acceleration more or less what we have seen in the last couple of months. Particularly in July, the volume was affected due to the bad weather. If we see what is going on in August, we can say that volumes are more like of June where the volumes were slightly low 2022. With these projections, we expect to end 2023 even down 2022 figures but still remaining the second best year in the history. Regarding prices and margins, we keep on our strategy of implementing prices, keeping our margins and considering what is going on with our costs. What happens with this high inflation period is when we have some delay in adjusting prices. We may have some temporary impact in margins. We are not expecting any competitive change of what we have been seeing in the last couple of weeks.

Unidentified Analyst: Okay. Thank you very much.

Operator: The next question comes with Daniel Rojas with Bank of America. Please go ahead.

Daniel Rojas: Good morning, gentlemen. Thank you for taking my call. Along those lines for the second half of the year and the outlook, regarding natural gas prices, what are you expecting the trend to be? And how do you expect this to impact margins? And this in light of the fact that you’ve started hooking up to the next registered gas piping. Thank you.

Sergio Faifman: Hi Daniel, thank you for your question. Regarding natural gas, we had last year an increase in the contracts that we closed. Those prices were up to this winter. Starting September and October, we started new contracts with prices below the one we closed last year. As a difference from what we did in the past this new contracts have longer terms than the one that we signed in 2022. Looking forward margins should be better than the ones we saw because we are not going to see the effect of the winter energy terms. Margins should be more like the ones we saw in the first Q of this year and the last Q of 2022. Obviously, considering that if the businesses with lower margins increase their weight in the calculated figures that is going to impact the consolidated margin.

Daniel Rojas: And in the Concrete business the high growth we’ve been seeing do you think it will continue into the second half and early part of next year, or should we expect it to normalize from here on? Thank you.

Sergio Faifman: [Foreign Language] We think that the Concrete business has room to still growing. In the — the industry gets more professionalized this channel of obsolete event should increase its participation.

Daniel Rojas: Okay. Thank you.

Sergio Faifman: You’re welcome.

Operator: Thank you. And this concludes our question-and-answer session. I would like to turn the conference back over to Diego Jalon for closing remarks.

Diego Jalon: Thank you for joining us today. We truly appreciate your interest in Loma. As we look forward to meet you again in our next call, we remain available for any questions that you may have. Thanks again and have a nice day.

Operator: This conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.