Loma Negra expects Argentina's cement demand to continue rising
This week CemNet reported that cement consumption in Argentina had expanded by 16 per cent in February, as the market continues to consolidate its recovery from the pandemic. The improving market is a big boost for domestic cement producers such as Loma Negra which released slightly downbeat results for the 4Q21.
Loma Negra, a subsidiary of InterCement (Brazil), reported a 37.4 per cent fall in net profits in the 4Q21 to ARS2795m (US$25.8m). However, sales volumes of cement, masonry and lime during 4Q21 increased by 3.5 per cent to 1.7Mt, mainly leveraged by the recovery of bulk cement, a segment that was more affected by the restrictions resulting from the COVID-19 pandemic in 2020. "Sales of bagged cement showed solid results due to sustained demand from the retail sector, finding its participation of sales by channel already normalised with respect to historical values, after the strong recovery that bagged cement had in 4Q20," reported Loma Negra.
Commenting on the financial and operating performance for the fourth quarter of 2021, Sergio Faifman, Loma Negra's CEO, noted: "During this year, the level of activity in the construction industry boosted cement demand to almost reach record levels, leaving behind the difficult times experienced during the pandemic."
Argentina's cement demand is reviving
The bigger picture is certainly one of improvement. Loma Negra's net revenues for the FY21 increased by 17.3 per cent to ARS73,668m (US$655m). There is a growing feeling that the worst may be behind for the Argentinian cement sector.
Loma Negra expects the record cement demand in 2021 to continue in the next 12 months. Construction activity is increasing in 2022 and has seen its highest rise since August 2021. Bagged cement sales reached 60 per cent of sales in the 4Q21 and are starting to recover towards the high of 70 per cent in 2020. The trend is likely to see bagged sales regaining more market share in 2022 from the 61 per cent seen in 2021. Cement sales this year are on a similar trajectory to pre-pandemic levels of 2019.
L'Amalí plant boosts production for the capital
Loma Negra especially is looking ahead with optimism. It is now positioned to deliver more cement having finished the upgrade of its L'Amalí plant. "With great pride, in the month of December, we had the pleasure of inaugurating, in the presence of government authorities, customers, suppliers and shareholders, the second line of Planta L'Amalí, transforming it into one of the largest cement production plants in South America," said Mr Faifman. "This undoubtedly marks an important milestone in our 95-year history and solidifies our leadership in the cement market in Argentina." am
With 4.9Mta of cement capacity, L'Amalí is the largest plant serving the Buenos Aires region. It is located to the south of the capital, close to the Cementos Avellaneda Olavarría plant, which has a cement capacity of 2.68Mta, as well as Loma Negra’s own 1.3Mta Barker plant, which is situated nearer to the coast. North of the capital, Loma Negra operates the 0.5Mta Ramallo grinding plant while the closest plant to Buenos Aires is Holcim’s 1Mta Campana grinding plant.
Further domestic expansion projects are currently situated away from the capital in Córdoba where Holcim is expanding its 4.7Mta Malagueño plant by a further 0.51Mta of capacity, and to the south where Petroquímica Comodoro Rivadavia (PCR) is upgrading the 0.53Mta Pico Truncado facility to 1Mta.
Summary
GDP growth in Argentina saw a 17.9 per cent rise in the 2Q21 YoY and recorded an 11.9 per cent rise in the 3Q21 YoY, reports Loma Negra. Going forward, Loma Negra forecasts 9.7 per cent growth in the 1Q22 YoY, followed by more moderate growth of three per cent in the 2Q22 and 2.2 per cent in the 3Q22 and 4Q22, respectively. In 2021 cement demand almost reached record highs in Argentina. The World Bank approved a US$347m loan in May 2021 to improve the service and infrastructure of the Mitre railway line. The Mitre passenger railway transports more than 7m passengers annually in Buenos Aires.
Further cement demand will come from China's Belt and Road initiative, which President Fernández signed up for in February 2022 and is expected to deliver a Chinese investment of approximately US$23bn. Half of the projects have already been approved, including the construction of a fourth nuclear power plant, Atucha III, and the Santa Cruz hydroelectric dams.
