Good morning. Welcome to Loma Negra first quarter 2020 conference call and webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there'll be an opportunity to ask questions. Also, Mr. Sergio Faifman will be responding in Spanish immediately following the English translation. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Mr. Gastón Pinnel, IR Manager. Please go ahead.
Thank you. Good morning and welcome to our first quarter 2020 earnings release conference call. Above all, we hope you and your families are safe and well. 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 filing 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 a discussion on non-GAAP financial measures. The full reconciliation to the corresponding financial measures is included in the earnings press release. Now, I would like to turn the call over to Sergio. Please, Sergio, go ahead.
Thank you, Gastón. Hello everyone, thank you for joining us today. First, I hope you and your family are safe and well during this unprecedented time. Clearly, we are operating in a difficult environment. We expect from now on things to start improving gradually. I want to thank all our people in Argentina and Paraguay who face enormous obstacles and showed great resourcefulness to keep this business running, to produce and sell products that people rely on every single day to provide themselves, their family, and their community, the infrastructure and shelter they need. Our concern to our employees, our customers, our suppliers, and our community has never been more imperative. We treat it with the utmost importance. We attempt to do our best for our stakeholders.
I would like to mention a few highlights of the quarter, and then Marcos will take you through our market review and financial results. Afterward, I will provide some final remarks. We will open the call for your questions. Starting with slide three. Let me share with you the key measures that we took to adopt crisis commitments that we create in order to manage the effect of coronavirus crisis. Our people's health and safety are non-negotiable, and it's our main priority always. This is why we suspend national and international trips, and we implement as fast as possible a home office scheme aiming to protect our people and their family. On March 20, and in compliance with the government's declaration of wide-ranging lockdown, we temporarily suspend our production facility and the L'Amalí expansion project.
After the first week of April, we resumed production and dispatch of cement with the adoption of new sanitation protocols. As of today, and after government permits were granted, L'Amalí expansion work have resumed. During this situation, we strengthened our effort to secure working capital needs, tightening fixed cost structure, and reformulating our capital expenditure priority. Of course, the speed or breadth of the recovery dynamic is yet uncertain, and we remain alert regarding the evolution of the crisis. Now, turning to slide four. 2020 started with some headwind, particularly related with the fragile macroeconomic situation of the country and a rampant recession. By the end of the quarter, the coronavirus pandemic outbreak bringing additional challenges to the already adverse context. Cement demand in Argentina in the first quarter contract around 29% year-over-year.
Our top line for the quarter decreased also around 30% year-over-year to ARS 7.8 billion. Our adjusted EBITDA declined by 17.9%. Still, we were able to expand margin by 479 basis points to 33.5%, mainly reflect rigorous focus in cost control and our commitment to maintaining high productivity and healthy profitability levels. Our core Argentine cement business remains the principal factor behind this margin expansion. As shown on this slide, measured in U.S. dollar, we achieved an adjusted EBITDA of $42 million, down by 22.4% year-over-year. Our bottom-line decreased year-over-year and stood at $10 million.
Additionally, our net debt to last 12 months EBITDA of 1.26 x, and our cash position provide us with a good position to manage our short debt maturity. I will now hand off the call to Marcos Gradin, who will walk you through our market review and financial results. Please, Marcos, go ahead.
Thank you, Sergio. Good day, everyone. I also hope you and your beloved ones are safe and well. As you can see on slide five, Argentina is in the middle of economic activity contraction, neither the construction sector nor the cement industry are exceptions to this situation. Argentina faces important challenges to achieve sustainable growth over time. A forecast for the Argentine economy at the beginning of this year already revealed a drop in GDP for 2020 compared to 2019. On top of this negative expectation, we now need to factor in the health and economic crisis caused by the COVID-19 outbreak by the end of March. In the first month of this year, the bulk segment was the most impacted by the delay in the execution of public and private construction projects. By contrast, the bag segment was better supporting the economic contraction.
Consequently, the share of cement sold in bag increased by almost 8% points from 56% in first quarter 2019 to almost 64%. This trend will continue in the following months, where bag will continue to gain share as public and private infrastructure sectors are suffering the most. Initially, on March 20th, the national government declared a broad quarantine providing for social prevention and mandatory isolation in the context of the COVID-19 pandemic. We virtually made a full stop in all our production. In parallel, demand dropped by nearly zero during the first few days since March 20th. Afterwards, in April 3rd, the government decided to include mining and building material provided by building material depots in the social product list. Since that moment, some of the demand for cement was restored. Consequently, we resumed cement production.
Certainly, we are cautious, and we are attentive to development of the pandemic in the country and the effect that it may have in our production demand. Under this unprecedented situation, we decided to withdraw any sort of guidance regarding the industry growth by the end of the year. We hope to have more clarity in the following quarters. In April, the market declined 55%, with the particularity that the first days of the month, cement sales were almost zero, with private construction not permitted and public works were insignificant. Therefore, the demand was mainly observed in the bag segment through wholesalers. Turning to slide six for a review of our top-line performance by segment, revenues were down 29.6% as sales volumes fall reflects adverse economic context, and March was already impacted by COVID-19 pandemic. Cement sales volumes dropped 26.9% year-over-year.
Thus, revenues were marginally compensated by positive pricing, falling by 25% year-on-year. In Paraguay, where the first two months of the year were affected by sluggish public and infrastructure works, volumes and revenues were down 13% and 14.5% respectively. Revenues of concrete and aggregates in Argentina were the most impacted by the halt in public and private projects, plummeting 73.6% and 67.1%, respectively. Revenue from our railroad segment decreased 24.9% year-on-year as a consequence of softer transported volumes in almost every sector. Moving on to slide seven, consolidated gross profit for the quarter was down 25.6% year-on-year with a margin expansion of 164 basis points, reaching 30.5% in the quarter. This was mainly driven by our core cement operation in Argentina, reflecting production cost under control with significant reduction in energy input costs and the benefits from previous footprint adequacy efforts achieved last year.
SG&A expenses as a percentage of revenues decreased by 29 basis points to 8.1% from 8.4%. First quarter 2019 included some non-recurrent costs of the structural adequacy and with a construction of 32% year on year. Please turn to slide eight. The drop in demand explained a 17.9 declining of our adjusted EBITDA. We achieved a consolidated margin expansion of 479 basis points to 33.5%, primarily explained by cost efficiencies in cement segment in Argentina. When excluding the application of inflation accounting, adjusted EBITDA for the cement segment in Argentina increased 34% year on year, the margin expanded by 656 basis points to 38.3%, as we benefit by a significant reduction in energy input cost and also by the footprint adequacy efforts achieved last year. Paraguay posted around 23% growth in adjusted EBITDA, with the margin going back 245 basis points to 42.2%.
In line with the building material sector and economic activity in general, our railroad segment EBITDA contracted by almost 57% with a margin contraction to 3.8%. Adjusted EBITDA margin of our concrete and aggregate segment presented a strong contraction year-on-year to - 7.7% and - 11.7%, respectively. Mainly as this segment, we are more directly impacted by the halt in public and private infrastructure projects. Despite the strong reduction in volumes in the first quarter, our cement business in Argentina continued improving in terms of EBITDA per ton measured in U.S. dollars, around $36 per ton above the year-ago quarter. Moving on to the bottom line on slide nine, net majority income for the quarter decreased by almost 43% year-on-year, reaching ARS 857 million, resulted mainly from an adjusted EBITDA contraction and a negative impact of total financial loss.
Total finance results represented a loss of ARS 456 million compared to a loss of ARS 189 million in the first quarter in the previous year. The foreign exchange loss of ARS 170 million compared to ARS 239 million in first quarter of 2019. The higher interest rate environment, together with the higher gross debt, resulted in a net financial expense of ARS 410 million or ARS 148 million higher than in first quarter 2019. The net passive monetary position resulted in a gain of ARS 124 million. Measured in U.S. dollar, our net majority income decreased 60% to $10 million in the quarter from $26 million in the year ago quarter.
Moving on to the balance sheet, as you can see on slide 10, during the quarter and until March 20, we continued to make progress in our capital expenditure plan, with investment for the quarter reaching ARS 4 billion or approximately $66 million, 79% of which was dedicated to the expansion project. Our net debt at the end of the quarter was $226 million, with a gross net debt breakdown by currency of 49% in Argentine pesos, 38% in hard currency, and 13% in guaraní. Net debt to adjusted EBITDA ratio of 1.26 x compared to 0.86 x at the beginning of the year. As the current situation continues to be conditioned by the COVID-19 restrictions, we remain particularly on top of our liquidity and our liability management. Our debt, which is bank debt only, we consider that has a manageable maturity profile.
We are working on and have already rolled over part of our short-term debt. As we continue rolling over these maturities in the coming months, we expect the share of local currency debt to continue increases in our balance sheet. Now, for our final remarks, I would like to hand the call back to Sergio.
Thanks, Marcos. To wrap up the presentation, I please ask you to turn to slide 11. We believe that the unique time is an opportunity to prove to ourselves our true values, health and safety of our employee are always a priority, as it is our commitments with our community, our supplier and customer, and of course, our shareholder. At this moment, it seem pointless trying to provide guidelines for 2020 industry trends, as recovery depends on the local economy turnaround, sovereign debt negotiation, and evolution of the coronavirus pandemic, among other challenges. At the beginning of April, we have already resumed production, adopting new sanitation protocols, and more recently, work on L'Amalí expansion project were restarted. We need to keep looking forward, searching for alternative that will help us navigate through this new environment, uniting and taking care of each other's .
This is the end of our prepared remarks. We are now ready to take questions. Operator, please open the call for questions.
Thank you. We will now conduct a question-and-answer session. If you would like to ask a question, please press star then one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star then two if you would like to remove your question. For participants using speaker equipment, it may be necessary to pick up your handset prior to pressing a key. Once again, star one on your telephone keypad. We would also like to ask that you limit your questions to one question and one follow-up. Please, if you have additional questions, you may re-enter the queue for questions, and they will be addressed. Also, please note that Mr. Sergio Faifman will be responding in Spanish immediately following an English translation. Please hold momentarily while we assemble our roster.
Our first question is from Alejandra Obregon from Morgan Stanley. Go ahead.
Hi. Good morning. Thank you for taking my question and for the call. This is related to infrastructure works, and how do you think, or how do you envision the outlook for infrastructure once we exit the coronavirus outbreak? If you could provide some color on what you're seeing for the month of April in terms of demand and dispatches in Argentina. Thank you very much.
[Non-English content]
Good morning, Alejandra. Thank you for your question.
[Non-English content]
Our view is that the government is preparing an ambitious infrastructure plan that once the sovereign debt and the COVID-19 situation are solved, they are going to start to implement.
[Non-English content]
From our conversations with government officials, they are going to be focusing mainly on housing and middle to small-sized infrastructure works.
[Non-English content]
We believe that this is one of the key elements that the government is betting on in order to boost the economy once the coronavirus situation is over.
[Non-English content]
Regarding the April volume, the industry ended up with - 56%, drop in volumes compared to last year.
[Non-English content]
We need to remind that in the first eight to 10 days of the month, we had virtually zero shipping since it was forbidden to produce and to operate in our plants.
[Non-English content]
Considering only the last 15 days of the month, the average drop will be around 40%.
[Non-English content]
One key factor from this volume is that it is mostly bag segment, mainly because the large infrastructure projects, either public or private, are halt.
[Non-English content]
We are optimistic that in the next few months, once these larger infrastructure projects start to being executed again, the volume should increase consequently.
Thank you very much. These were very clear.
You're welcome.
This concludes our question-and-answer session. I would now like to turn the conference back to Gastón Pinnel for closing remarks. Oh, wait, we have a question. We have two questions. One moment. The next question is from Nicolas Zalles from LW Investment Management. Go ahead.
Hi. Good morning. Thank you for taking the call. I just have a quick question. Against the possibility of a possible sovereign default, would you comment on how would you see a change in your operations just in general, and how that would change the business environment in Argentina?
Hello?
[Non-English content]
Good morning. Thank you, Nicolas, for your question.
[Non-English content]
Okay.
We are working on a base case scenario where there is no default. According to the last signals, there should be an agreement with the bondholders.
[Non-English content]
Even in the scenario of a default, of course, it will have an impact in the economy and in the economy growth, and particularly in the financing of the public works and other government expenditures. We need to remind that during 2002 to 2007, where Argentina was in default, the economy grew.
[Non-English content]
We also need to remind that our industry in particular it's considered as a value haven and in particular for the infrastructure works, it's also a lever that the government can take in order to boost the economy and also to try to underpin the labor market.
Our next question is for Antonella Rapuano from Santander. Go ahead.
Hi, thank you all for taking my question. Actually, I have two questions, if I may. The first one is related to the EBITDA margins, which were very impressive, in my view, considering the volume drop. I was wondering how much of this cost efficiency is sustainable along the year. Regarding this, how much of the cost reductions came from lower energy costs and how much from the fixed costs from your readequacy effort on the fixed structure side? My second question relies on the L'Amalí project. I was wondering how much remaining CapEx is pending for the rest of the year to be deployed in this project. Thank you.
[Non-English content]
Thank you, Antonella, for your question.
[Non-English content]
Regarding our margins, it is in line with all the structural adequacies that we have implemented last year.
[Non-English content]
Last year, we did these before mentioned restructurings, and also including staff reduction. This year we already observed the benefits from this restructuring.
[Non-English content]
The margins, we mainly have an effect in the cement segment. We took a few measures in order to improve this margin, even with the drop of volumes.
[Non-English content]
Regarding energy, both thermal and electrical, on average, we have a reduction of around 25% compared to last year.
[Non-English content]
Additionally, with the drop in volumes, we have the ability to produce in a more efficient way in our most efficient facilities.
[Non-English content]
Regarding L'Amalí II, we have already resumed our plan for the expansion. We expect to be ready by the year-end. The remaining of the CapEx is approximately between $60 million and $50 million.
[Non-English content]
Most probably, part of this $ 50 million-$60 million are going to be disbursed in the following year, in 2021.
Great. Thank you. Very clear.
You're welcome.
Our next question is from Coleman Clyde from HSBC. Go ahead.
Hi, gentlemen. Thank you for taking my question. I was going to ask on margins. A lot of that was already answered, just to follow up with that. What improvement do you expect to see from the L'Amalí plant expansion? You've made some impressive improvements already in margins. I know that you expected that plant to add to your efficiency. Do you still expect to see a further margin improvement once that plant is underway? My second question would be on prices. I see that prices were up 1% in the first quarter. How are you seeing prices during the second quarter? Has it been more challenging to pass along cost inflation given the current environment? Those would be my two questions.
Thank you for your question.
[Non-English content]
Thank you, Clyde, for your question. Yes, clearly, L'Amalí still has some further improvements in our EBITDA.
[Non-English content]
We still have some minor improvements in variable costs and also some improvements in fixed cost structure.
[Non-English content]
Regarding prices, we foresee the price environment similar to what we observed in the past, considering the inflation and the effects, and always trying to keep our profitability under control.
Thank you very much. Very clear.
This concludes our question-and-answer session. I would now like to turn the conference back to Gastón Pinnel for closing remarks.
Thank you for joining us today. We appreciate your participation in these unprecedented times and your interest in our company. We look forward to meeting more of you over the coming months and providing financial and business updates next quarter. In the meantime, the team remains available to answer any questions that you may have. Thanks again and be safe.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.