Loma Negra Compañía Industrial Argentina Sociedad Anónima (NYSE:LOMA): Can ROCE Turn the Corner in 2025?

Loma Negra, Argentina’s dominant cement producer, faces a critical juncture in 2025: stabilizing its Return on Capital Employed (ROCE) and Return on Equity (ROE) while navigating a fragile economic recovery. Despite operational improvements and strategic pivots, the company’s first-quarter results highlight a mixed picture of margin gains and top-line pressures. This article examines whether Loma Negra can reverse declining returns and capitalize on Argentina’s projected growth.

Financial Performance: Margins Improve, but ROE Struggles

Loma Negra’s Q1 2025 results underscore a trade-off between cost discipline and revenue headwinds:
- Adjusted EBITDA margins expanded by 140 basis points to 24%, driven by cost efficiencies in the cement segment (down 21.9% per ton in variable costs).
- Net profit plummeted 73% YoY to Ps. 21.25 billion, primarily due to a 83.6% drop in gains from currency fluctuations**, reflecting reduced inflation-driven financial benefits.

The decline in net profit directly impacts ROE (Net Profit / Equity), which is likely under severe pressure. Meanwhile, ROCE (EBIT / Capital Employed) shows more resilience, though it remains clouded by revenue declines.

Strategic Initiatives: Betting on Cost Controls and Market Shifts

Loma Negra is pursuing three core strategies to turn its capital returns around:

1. Product Mix Optimization

The company is prioritizing high-margin bagged cement, which grew 12% YoY, outperforming bulk cement constrained by weak public works. This shift aligns with rising demand for residential and small-scale construction, which are less sensitive to macroeconomic swings.

2. Infrastructure and Renewable Growth

• Concrete volumes rose 22.8% due to private infrastructure and renewable energy projects in Buenos Aires.
• Aggregates volumes surged 29% on road construction projects, though pricing pressures limited revenue gains.

3. Balance Sheet Resilience

With a net debt/EBITDA ratio of 0.96x (down from 1.30x in 2024), Loma Negra has reduced leverage while maintaining liquidity. 84% of debt is USD-denominated, shielding it from peso volatility.

Risks and Challenges

• Pricing Pressures: Cement, concrete, and aggregates all face downward pricing pressure due to oversupply and weak demand in public-sector projects.
• Weather and Logistics: A Bahía Blanca storm disrupted railroad operations in Q1, highlighting reliance on infrastructure vulnerable to climate risks.
• Macroeconomic Uncertainty: While Argentina’s GDP is projected to grow 5% in 2025, inflation and currency instability could persist, complicating cost management.

Data-Driven Outlook

Key Takeaways:

• Q1 2025 cement volumes rose 8.9%, with April showing a 28% YoY jump, signaling accelerating demand.
• Cement pricing remains above cost increases, but competitive pressures limit margin expansion.
• Railroad volumes grew 19.9%, but reliance on low-margin grain shipments (60% of rail revenue) threatens profitability.

Conclusion: Turning ROCE Requires Sustained Volume Growth

Loma Negra’s ability to stabilize ROCE and ROE hinges on two critical factors:
1. Volume Recovery: Cement dispatches must grow double digits annually to offset pricing pressures. April’s 28% YoY jump offers hope, but sustained momentum is vital.
2. Margin Protection: Cost controls and product mix shifts (e.g., bagged cement) must counterbalance weak pricing. The 24% EBITDA margin in Q1 suggests this is achievable.

While risks like inflation and weather disruptions loom, Loma Negra’s disciplined balance sheet and strategic focus on high-growth segments (renewables, road construction) position it to capitalize on Argentina’s recovery. Investors should monitor Q2 results closely—particularly cement volumes and railroad margin recovery—to gauge whether returns can finally turn the corner.

In sum, Loma Negra’s Q1 2025 results are a mixed bag, but its operational resilience and strategic pivots suggest the company is moving in the right direction. The next few quarters will be pivotal in determining whether this cement giant can rebuild investor confidence—and its capital returns.