Good morning, and welcome to the Loma Negra Second Quarter 2018 Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity for you to ask questions [Operator Instructions]. Please note that this event is being recorded. I would now like to turn the conference over to Mr. Gaston Pinnel, Investor Relations Manager. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining us today. Speaking during today's call will be Sergio Faifman, our CEO and Vice President of the Board, and Marcos Gradin, our CFO. Both will be available for the Q&A session. Before we proceed I would like to make the following Safe Harbor statement. Today's call will contain forward-looking statements and I refer you to the forward-looking statements section of our earning release and recent filings with the SEC. We assume no obligation to update or revise any forward-looking statement to reflect new or changed events or circumstances. Now, I would like to turn the call over to our CEO, Sergio Faifman.

Thank you, Gaston. Hello, everyone. And thank you for showing up today. It is a pleasure to welcome you to the Loma Negra second quarter 2018 earnings conference call. I'll start with an overview of our performance during the quarter and then Marcos will go through market trends and over our financial results. Afterwards, we will open the floor for the questions. Starting with Slide 3, we experienced a challenging macroeconomic environment in Argentina, which imply a slowdown in cement demand growth in the quarter. Despite this scenario in Argentina our gross business delivered solid results, reported continuing year-on-year top line growth and EBITDA margin expansion. This performance was achieved despite selective flood volume as we continue to balance profitability and market position. On a consolidated level we report year-on-year growth in both revenue and EBITDA, which were up 77% and almost 27% respectively. We continued to expand cement margin year-on-year in Argentina. However, our consolidated adjusted EBITDA margin contract mainly reflecting a poor performance in our railway segments and there was growth in our lower margin concrete business. Year-on-year however, our bottom line fell 34% impacted by foreign exchange loss, largely non-cash resulting from the sharp peso depreciation in the period. While we experienced 50% of the peso depreciation, revenue measured in US dollar fell 8% year-on-year and adjusted EBITDA was down 15%. We closed the quarter with a strong balance sheet, with net debt to last 12 months EBITDA for 0.83 times, ensuring solid growth and flexibility to pursue our strategic initiative. In that respect the expansion of L'Amalí plant remained on track to begin operation in 2020. Driving profitability to a higher level and bring additional capacity to increase efficiency towards our concrete [ph] demand. I'll now hand over the call to Marcos Gradin who will review our market trends and financial results. Marcos go ahead.

Thank you, Sergio. Good day everyone. Turning to Slide 4 for a review of the macro outlooks and industry trends, a mix of external and internal factors affected the macro dynamics this quarter. As a result, consensus for GDP growth for 2018 has been adjusted downwards to negative 0.3%, recovering to 1.5% in 2018 and 2.5% in 2020. In this context we saw contraction in project construction activity which in turn impact overall cement demand. Industry cement sales growth slowed to 1.3% year-over-year in the quarter. While cement continued to win share of total cement, sales mainly driven by the current public infrastructure projects continue to move ahead. Looking forward, given the current economic scenario in Argentina and our tougher macro environment in the second half of the year, we expect cement demand to decline in the second half and to remain flat in the year reaching similar record volumes reported in 2017. While public works developments are anticipated to move ahead, we expect private consensus to slow down. Now, please turn to Slide 5 for a review of our top line performance by segment. Keeping our focus on balancing profitability and market position, revenues from cement in Argentina was up 33% year-over-year. We continued to see healthy pricing dynamics in the quarter, which more than offset relative FOB volumes. In addition to the challenging macro backdrop, volumes were also affected by adverse conditions in our key markets. Good progress in public infrastructure works mainly in metropolitan Buenos Aires enabled us to deliver an 80% in concrete revenues from the year ago quarter, supported by higher volumes and prices. Cement revenues in Paraguay were up almost 50% as the appreciation of Guarani against the Argentinean peso together with local price increase more than offset low single digit decline in volume.…

Now please turn on to Slide 10. Looking ahead, we remain cautiously optimistic for the remainder of the year. We expect cement demand to contract in the second half of the year. Though full-year cement demand could come close to the record level achieved in 2017, supported by our leading market position and strong balance sheet, we are well positioned to continue pursuing development between profitability and market position in a more complex economic environment. We're confident about the long term prospect for our business and the completion of the capacity expansion of L'Amalí plant in 2020. This will bring a higher level of efficiency addressing Argentine cement demand and driving profitability guidance. This ends our prepared remarks. We're now ready to take questions. Operator, please open the call for questions.

Thank you. We'll now conduct the question-and-answer session. [Operator Instructions] And our first question comes from Daniel Sasson from Itau BBA. Please go ahead.

Hi, Sergio, Marcos, Gaston, thanks for taking my questions. Good morning. My question is related to your cost performance it caught our attention that if we consider that 40% of your costs in the cement business in Argentina are denominated in dollars, probably the portion denominated in pesos would have to have decreased sequentially, so you could post these - you could prevent the harsh decline in margins. Can you please give us more color on what drove your cost performance or is good cost performance and if you think it is sustainable going forward? That would be my first question. Thank you.

Hi, Daniel, how are you? This is Marcos. I'll say as you mentioned yes, 40% of our cost structure is in US dollars and added to this currency develop at [ph] obviously it's adjusted by inflation, but we are confident that we focus in trying to maintain this cost on - focus and try to avoid overshooting or inflation of our cost. That's why you're seeing that margins in the cement business is improving and that also has to be because of the analysis that we make of price movements and how the cost structure affects the dollar and inflation affects our cost structure. Yes, so we're always looking the different variables of the cost structure and then trying to maintain the profitability or to defend ourselves again this cost improvement.

Thank you, Marcos. Just a follow-on - a follow-up on your comment about prices. If you could give us a sense on where prices are in dollar terms now versus where they were at the end of last year before the 45%, 50% depreciation in the pesos. And were prices are in Argentine and pesos versus inflation year-to-date versus the levels they were in the end of last year that would help us a lot? Thank you.

Daniel, we prefer not to ask about this particular - on prices where we are on the call. Yes we don't give this kind of information. The number that you get from the - from our balance sheet is $100 per ton.

Perfect. Thank you.

And our next question comes from Nikolaj Lippmann from Morgan Stanley. Please go ahead.

Thank you and good morning everyone. Thanks for taking my questions and congrats on the numbers. My question is very similar to the prior question on the cost structure, as we come into the third quarter where you would typically use more petcoke. How should we think about your cost base there and if you can provide any color life you have already contracted petcoke or whatever fossil fuel that you will be using in the third quarter and towards the second half of the year, if you have a longer term contract already with the FX done or whether we should think more in terms of off spot for the third quarter and second half? Thank you very much.

Nikolaj, I'm sorry. We are currently working at I will say, 70% relying on natural gas and 30% relying on petcoke and the petcoke we acquired it's - it was not acquired recently, yes. So it's - it's at last year cost, yes. So you shouldn't see a pickup in the thermal energy in the third quarter regarding this kind of mix of thermal energy.

That is very useful. Congratulations on that. Thank you very much.

And our next question comes from Dan McGoey from Citigroup. Please go ahead.

Great, thanks gentlemen. Good morning and congratulations on the inline results in a challenging environment. As well as for providing the updated outlook for the remainder of the year, my question is about the - I guessed your sense of visibility into the demand in the second half of the year? And I'm wondering if you can speak a little bit about what you're seeing both on the infrastructure side as well as in the bag sales for instance on the infrastructure side there's a number of highway construction projects underway. Are you seeing any deferment of work due to the reason scandal or any difficulties in terms of financing? Thanks.

Thank you, Dan. This is Sergio Faifman. I speak in Spanish and then I'll translate, okay.

Okay.

[Interpreter] So regarding the second semester, where we are expecting a construction in Argentinean demand, but still we believe the year - by the year-end we're going to meet the same volumes at in 2017. [Interpreter] So our expectation is that on the second half this slowdowns would be stopping and beginning and from 2019, we expect our growth in the GDP as the consensus of the economy of 1.5% and for 2020 of around 2.5% on the GDP growth. [Interpreter] And regarding the public works they remain - currently they remain in the same level and for the next year we expect that the PPPs are going to increase their participation. [Interpreter] We're already working together with the PPP constructions, the six PPP constructions and the government is also planning new PPPs for the near future.

Great, thank you very much for this response.

And our next question comes from Tony Christ from Capital Securities. Please go ahead.

Thank you. If we have questions after the call, I assume we can use your email you provide and/or the telephone number you provide and I mean during the course of the quarter to call you and who will be talking to Marcos or Gaston I mean I'm just a little curious about it who your investor rep is?

Yes. Tony you can talk with me, Marcos or Sergio, Sergio or Gaston, yes but you can also email the Investor Relations is received by us.

Okay. Thank you. And excuse me. And as a follow-up just on a macro level Argentina has gone through well let me pick a number 60 years of socialism and it's imbedded and people have learned it, they've great grown up, their parents have grown up, the children have grown up to be to be adults. On the other hand, I firmly believe there's a tremendous need for concrete in that kind of an environment going forward. But how do you feel about Macri's efforts. Is he going to be successful in bringing the country out or is it going to partially remain socialistic or because certainly the company is endeavoring to practice free enterprise. So this is a big macro question and I know I'm just asking for an opinion and I'm not going to hold anybody to it but please comment.

Hi, Tony. [Interpreter] So our vision is that the government is taking the right measures for the future although with an impact in the short term, but we remain confident.

And the next question comes from Mauricio Serna from UBS. Please go ahead.

Hi. Thanks for taking my questions. Sorry I got cut off from the middle of the call so I'm sorry if I'm asking something that has already been asked. But just like to talk a little bit more about the prices. I guess we've seen in your pricing in Argentinean pesos roughly 6% above the average inflation just was wondering if that's going to - we could expect that strategy going forward as a way to protect the margins and are you not concerned maybe any potential intervention from the government in terms of trying to fix the prices just to control inflation. And also if you could just tell us within your volumes the overall volume decline in Argentina was 0.6%, but how was the performance on the Great Portland cement category? Thank you.

[Interpreter] Thank you, Mauricio for your question. Lately our present prices have more to do with our cost inflation rather than the national inflation. [Interpreter] So our strategy regarding in prices are more to do with a tradeoff between profitability and our market position, always looking to generate value in the long term. [Interpreter] So when you have times with high FX volatility, we don't look the prices in measuring in US dollars. What we focus more is in the EBITDA per ton level and this was much more stable. [Interpreter] So finally, when we talk about the cement, it is mainly grey cement. It is all that we have. [Interpreter] So the weak point is that the numbers probably drive AFCP is 100% grey cement.

Okay, got it. So that's why I'm just trying to understand like if that minus 0.6% that you had for the quarter - if you isolated just for grey cement, how does that compared to the industry, I think the industry was up 1% in the quarter. So I just want to understand if there was maybe some increased market share losses during the quarter?

[Interpreter] So our numbers include grey cement, masonry and lime, while the industry numbers probably by the AFCP is only grey cement and we do not disclose this specific numbers of grey cement due to both the relationship with our competitors and also as inside information measure. [Interpreter] So at the final comment, our market share numbers remains around our target price which is pretty much stable.

Okay, understood. Thanks. And just a quick follow-up on when you mention the EBITDA per ton, you mentioned o it's been relatively stable, but just want to understand like throughout the quarter that number actually vary a largest considering that in April. The industry was still posting positive volumes in May and June were weaker. So just trying to understand it like weaker volumes had also like any impact on the EBITDA per ton or did that really maintain stable like throughout the quarter?

That's an average, yes. But it's pretty stable. Yes, because we got higher volumes on April, yes, but you haven't got the change in the different variables such prices doing some yes. So it's an average. Obviously we are focusing in this EBITDA per ton in dollars and we're working on that and we as Sergio mentioned should remain on these ranges.

Okay. Thank you very much.

And next question comes from Carlos Peyrelongue from Bank of America Merrill Lynch. Please go ahead.

Thank you, thank you gentlemen for call. The question is related to future PPPs, would you expect the different investigations on corruption allegations of companies in Argentina, construction companies to affect the interest for PPPs in the future or those that are bidding for the PPPs are different from the construction company? Thank you.

[Interpreter] Hi, thank you, Carlos for your questions. [Interpreter] Actually we don't see an impact on the PPPs. [Interpreter] So there are some points. Some of the - most of the public work is pretty much optimized currently and also the PPPs that were granted, the constructions are not involved in this standard. [Interpreter] And also both the process and the PPP scheme, they have a system that prevents this situation –that provides more transparency and prevents these process to stop.

And our next question is a follow-up from Daniel Sasson from Itau BBA. Please go ahead.

Hi, thank you. Just to just a follow-up on the L'Amalí expansion and I know you mentioned that the project seems to be on track and budget. I'm interested in these, are you write at a point of no return in terms of the startup of the project or if the market remains somewhat soft in 2019, you would consider postponing the startup of L'Amalí to - in order not to overflow the market with overcapacity? Thank you.

[Interpreter] Thank you, Daniel for your question. [Interpreter] So according to the situation of the country of Argentina, we have done analysis recently. [Interpreter] So even considering the lower current demand and also lower growth trends for the future the projects remains very profitable for the company. [Interpreter] So what is important to point out again and to remind us the L'Amalí project is not only good for the capacity expansion but also due to the higher efficiency in the production and in the logistics value provides.

And this concludes our question-and-answer session. I'd like to turn the conference back over to Mr. Gaston Pinnel for closing remarks.

Okay. Thank you for joining us today. We appreciate your interest in our company and we look forward to meeting more of you over the coming months and providing financial and business updates next quarter. In the interim the team remains available to answer any questions that you may have. Thank you and enjoy the rest of your day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.