Attracting an 18.3% Dividend Yield: The Allure of LOMA – Loma Negra Compañía Industrial Argentina and Its Commitment to Sustainability

 Attracting an 18.3% Dividend Yield: The Allure of LOMA – Loma Negra Compañía Industrial Argentina and Its Commitment to Sustainability

Conclusion: Despite Argentina's hyperinflation, the country holds firm. Please enjoy the read till the end. Here are some points that remained unclear:

1. The reason behind the exceptionally high dividend yield.
2. The reasons behind the optimistic revenue forecast for fiscal 2024, and why the Earnings Per Share (EPS) is a negative 285.08.

Background: The dividend yield of 18.13% piqued my curiosity.

Loma Negra Compañía Industrial Argentina is a vertically integrated company based in Argentina, active in the cement industry. It is listed on the NYSE under the ticker symbol LOMA. Let’s explore its history:

• 1926: Alfredo Fortabat discovers a large limestone deposit at San Jacinto Estancia and decides to establish a cement plant in the village of Pampas.
• 1927-1950: The facility, along with another in Barker nearby, produces 500,000 tons of cement annually.
• 1960s: New facilities open in San Juan and Zapala, making Loma Negra a leader in Argentina's cement and concrete production.
• 1980s: The first Portland cement facility opens in another Andean city, Catamarca.
• 1976: Maria Amalia Lacroze de Fortabat becomes the company's main shareholder, president, and chairman.
• 1992: Acquires competitor Cementos San Martin SA, strengthening its market leadership.
• 1995: Launches Recycomb.
• 1998-1999: Acquires five concrete manufacturing companies.
• 1999: Establishes the Loma Negra Technical Center.
• 2007-2008: Maintains a 48% market share.

A graph highlights the significant trend in December 2024, showing very optimistic sales forecasts and negative EPS.

Cash Flow Analysis:

From 2020 to 2022, there is a steady increase in operating cash flow—a positive indicator of sound management. Recent years show negative financial cash flow, suggesting that fundraising costs exceed new debt and equity issuance. The financial strategy might maintain investor confidence through dividends, despite expected losses, but this remains unclear.

Sand Shortage and Recycling Initiatives:

There is a reported shortage of sand compared to its consumption, which the United Nations warned about in May 2022. Loma Negra’s recycling efforts add value, particularly in cement and construction materials production. Here are some specific recycling initiatives undertaken:

• Alternative Raw Materials and Fuels: Incorporating recycled materials and alternative fuels into the manufacturing process, including using industrial by-products like fly ash and slag from steel manufacturing, reducing waste and minimizing environmental impact.
• Energy Efficiency: Focusing on improving energy efficiency across all operations, including optimizing energy use in production processes and investing in technology to reduce energy consumption.
• CO2 Emission Reduction: Integrating recycled materials and alternative fuels to reduce carbon emissions associated with cement production, part of a broader industry trend towards global sustainability goals.
• Community Recycling Efforts: Engaging in community-based recycling programs, which not only help manage waste but also educate the community on the benefits of recycling and sustainable practices.
• Water Conservation: Minimizing water use in manufacturing processes and enhancing water efficiency through recycling and reduction strategies, reflecting efforts to reduce the environmental footprint of business operations and potentially leading to long-term economic savings and improving the company’s reputation among environmentally conscious stakeholders.

Sustainability Report 2023: Loma Negra publishes a sustainability report on its portal site, detailing its commitment to sustainable development and leadership, the dedication and innovation of its workforce, and its engagement with communities to transform and improve lives globally. The report addresses major environmental and climate issues, striving for carbon neutrality and emphasizing overall environmental consideration.

Why the High Dividend?

• The 18.13% dividend yield is indeed an eye-catching figure, appealing strongly to public interest.
• Optimistic Financial Forecasts: Financial projections up to 2025 show aggressive revenue growth, with profits expected to recover after substantial losses forecasted for 2024. This optimism may be based on improved operational efficiency, expansion of market scope, or introduction of new products.
• Historical Dividend Policy: The reasons behind the high dividend yield, especially in years when losses are anticipated, are not immediately apparent from the provided data. However, possible explanations include:
  • High dividends could be a strategy to maintain investor confidence and attract new shareholders, especially in unstable markets. The company may wish to highlight its financial health and commitment to returning value to investors.
  • Some firms adopt a policy of maintaining or gradually increasing dividends as a sign of stability and reliability, which may be independent of short-term earnings fluctuations