Argentina's Recovery Will Drive Cement Industry Modernization

Key Takeaways

• Increased infrastructure investment and economic recovery in Argentina are driving demand for cement, positioning Loma Negra for greater revenue and reduced business cyclicality.
  
• Cost efficiency measures and financial discipline are improving margins and enabling strategic investments, supporting long-term growth and flexibility.
  
• Persistent margin pressures, macroeconomic volatility, weak segment performance, and high country risk significantly constrain growth prospects and heighten vulnerability to currency and policy shifts.

Catalysts

Manufactures and sells cement and its derivatives in Argentina.

• The ongoing recovery in Argentina's economy-evidenced by strong GDP growth and early-stage rebounds in cement volumes-along with increasing activity in both public infrastructure works and private investment projects, sets the stage for sustained demand growth for construction materials, which is likely to drive revenue growth and support a positive volume outlook in the coming years.
  
• Emerging momentum in bulk cement dispatches linked to industrial, commercial, and large-scale housing developments, combined with early-stage increases in public works across key provinces, positions Loma Negra to gain from accelerated urbanization and infrastructure modernization; this will support revenue expansion and reduce cyclicality.
  
• Loma Negra's substantial investments in cost efficiency initiatives-including lower energy input prices via favorable contracts and modernization of production processes (such as the transition to 25kg cement bags)-enhances operational leverage, which should translate into improved net margins as pricing dynamics normalize.
  
• Declining inflation and stabilization in Argentina's macroeconomic environment are expected to allow for periodic price adjustments above inflation, marking a shift from pricing stagnation and providing the opportunity for margin recovery and earnings growth as competition rationalizes.
  
• The prudent extension of debt maturities and maintenance of a robust balance sheet provide financial stability and the flexibility needed to deploy strategic capital expenditures, supporting long-term earnings growth and positioning the company to capitalize on demographic-driven increases in residential and infrastructure construction demand.

Loma Negra Compañía Industrial Argentina Sociedad Anónima Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Loma Negra Compañía Industrial Argentina Sociedad Anónima's revenue will grow by 13.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 7.8% today to 20.9% in 3 years time.
• Analysts expect earnings to reach ARS 205.0 billion (and earnings per share of ARS 1765.89) by about August 2028, up from ARS 51.8 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.0x on those 2028 earnings, down from 32.3x today. This future PE is lower than the current PE for the US Basic Materials industry at 22.8x.
• Analysts expect the number of shares outstanding to decline by 0.07% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 21.95%, as per the Simply Wall St company report.

Loma Negra Compañía Industrial Argentina Sociedad Anónima Future Earnings Per Share Growth

Risks

• Sustained pressure on pricing in the cement segment, driven by a more competitive landscape and the transition to a lower-inflation environment, has resulted in declining revenues and EBITDA margins-these dynamics may structurally persist, limiting the company's ability to drive top-line growth and compressing net margins.
  
• Operational results are heavily influenced by Argentina's macroeconomic volatility, including changes in inflation, exchange rates, and political developments (such as upcoming elections and evolving fiscal policy), creating ongoing uncertainty around revenue predictability and net earnings.
  
• The company posted significant contraction in gross profit and operating margins across most segments, with Concrete and Aggregates operating at negative EBITDA margins-if prolonged, this trend threatens overall profitability and limits earnings recovery.
  
• Delayed or limited impact from infrastructure and public works projects, which management acknowledges may require more time and an adequate regulatory framework, could result in sustained underutilization of capacity and delayed volume growth, constraining prospects for revenue expansion.
  
• Concentrated exposure to the Argentine market-with 71% of debt dollar-denominated and increasing net debt levels-leaves financial results vulnerable to currency devaluation, higher refinancing costs, and policy risks, which may erode both the company's net margins and its bottom line over the long term.

Valuation

• The analysts have a consensus price target of ARS14.84 for Loma Negra Compañía Industrial Argentina Sociedad Anónima based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ARS978.6 billion, earnings will come to ARS205.0 billion, and it would be trading on a PE ratio of 20.0x, assuming you use a discount rate of 21.9%.
  
• Given the current share price of ARS10.9, the analyst price target of ARS14.84 is 26.5% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.