Argentina's cement market has seen a revival in the last year and this week further positive indicators have been released with consumption rising by 7.4 per cent YoY during August 2017 to 1.122Mt, according to data from Asociacion de Fabricantes de Cemento Portland (AFCP).

Cimpor (an InterCement Company - itself part of the Carmago Correa group), which operates in Argentina via its Loma Negra subsidiary, also commented in its 1H17 results that cement consumption in Argentina is performing well enough for growth to reach around eight per cent by the end of 2017.

IPO fund raising
The pick-up will be well received by market leader Loma Negra which followed up its recent filing for an Iniital Public Offering (IPO) in New York with another share offering on the domestic stock exchange. Analysts suggest this could amount to a cash injection of some US$100m.

While much of the funds will be used to ease the debt burden of parent company Camargo Correa, Loma Negra also has plans to expand capacity at its L’Amalí cement plant located in the province of Buenos Aires. This will require an investment of US$350m to raise the plant's cement capacity from 2.5Mta to 4.7Mta by 2019. There will also be streamlining of operations to reduce the overall operating costs, the company says.

Loma Negra’s position of strength
Currently the company has a clinker and cement capacity of 5.5Mta and 9.9Mta, respectively and its Argentina-based operations comprise six integrated cement plants, two grinding units and one blending facility. Other downstream businesses include 11 concrete plants, one lime plant, a waste blending facility and one rented aggregates quarry.

The company has a market share of 46.1 per cent in terms of cement masonry cement, aggregates and concrete, according to AFCP. Importantly, it holds a market share of 51 per cent in the Greater Buenos Aires metropolitan area which accounts for 41 per cent of the country’s cement consumption. Domestic cement sales for the company in 2Q17 reached EUR188m compared with EUR135m in 2Q17, up 39.3 per cent YoY. Cement and clinker volumes sold in 2Q17 equalled 1.49Mt compared to 1.367Mt in 2Q16.

Going forward, Cimpor expects Loma Negra's operations to benefit from current market momentum. Per capita cement consumption in Argentina is relatively low compared to other Latin American countries at 248kg (Peru 366kg, Ecuador 374kg, Chile 378kg), but growth prospects remain positive. The country has experienced relatively little infrastructure development and has a significant housing deficit, which amounted to 1.4m units in 2016 and is expected to rise to 1.6m by 2020. In response, SENAVITAT, the National Secretary for Habitat and Housing, launched the Planhavi programme in 2012 which aims to provide 297,000 houses by 2020 at a cost of US$3.2bn.

Moreover, the new administration announced a US$260bn infrastructure, highways and housing programme in September 2016, which should provide regular cement demand going forward. Roads will be a major priority with the government launching a US$55bn nationwide programme from 2017-27 to renovate and operate existing roads and highways as well as build new ones. A major renovation of Highway Routes 2 and 7 will also be completed in March 2019.

The country is similiarly pouring investment into the modernisation of the Silvio Pettirossi International Airport in Asunción, which is expected to be completed in December 2018.

Paraguay asset
Loma Negra also has a 51 per cent share of Yguazú Cementos SA and its Villa Hayes plant in Paraguay where it has a 38 per cent market share in cement sales volume, according to management estimates. Cimpor reports that in 2Q17, Yguazu Cementos boosted volume growth by 37 per cent. Cement and clinker volumes sold in Paraguay amounted to 129,000t in 2Q17 compared to 112,000t in 2Q16.