Good morning and welcome to the Loma Negra Third Quarter 2018 Earnings Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions]. Please note that this event is being recorded. I would now like to turn the conference over to Mr. Gaston Pinnel, IR Manager. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining us today. We appreciate everyone’s participation. 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 closed. Speaking during today's call will be Sergio Faifman, our CEO and Vice President of the Board of Directors, 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 in 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 third quarter 2018 earnings conference call. Starting with slide three, we reported solid growth [ph] this quarter despite the challenging macro framework in Argentina. We maintain our focus on balancing growth and profitability, delivering the annual year consolidated top line growth of 47%, while the short-term EBITDA increased almost 70% and margin increased by almost 360 basis point. As measured in U.S. dollar adjusted EBITDA declined only 9% reaching US$53 million in the quarter. This good result was driven by robust performance particularly our core Argentine cement business, where we achieved 492 basic point expansion in adjusted EBITDA margin, despite lower trade volumes. Our bottom line however was impacted by foreign exchange losses that were mainly non-cash, resulting from a sharp peso depreciation experienced in the quarter. Our leading market position impacted by the healthy balance sheet with net debt to last 12 months EBITDA of 0.88x providing a solid platform to continue implementing our [Indiscernible] plant. The L’Amalí plant expansion is an important element of our long-term strategy which will allow us to enhance production efficiency and profitability, while providing much needed capacity when the market recovers. I will now hand over the call to Marcos Gradin who will review our market trends and financial result. Afterwards, we will open the call for questions. Please Marcos, go ahead.

Thank you, Sergio. Good day everyone. Please turn to slide 4 for a quick overview of the macro outlooks and industry trends. Consensus expectation for GDP growth have been adjusted downwards since our previous earnings call to negative 2.4% for 2018 recovering gradually to negative 1% in 2018 and to positive 2.4% in 2020. Overall construction activity contracted during the quarter, resulting in almost 6% year-on-year decline in overall cement sales where bulk declined 8% and 2% respectively. Driven by forwarding infrastructure works, Bulk cement demand continue to gain share of total cement sales. We see current Public Works moving ahead, particularly in the Buenos Aires metropolitan area. We remain cautiously optimistic despite the construction of cement demand that occurred over the last month. Expected industry cement demand levels for the full year to remain at similar levels to those in 2017. Now let's turn to Slide 5 for a review of our top line performance in greater detail, starting with our core segment, our Argentine cement business posted a robust performance, with revenues up a 42% year-on-year and we focused on balancing growth and profitability. We continue to see a favorable pricing environment this quarter, while sales volume declined by mid single digits. Adding to the weaker overall demand environment, volumes were also impacted by less business sales this quarter. Our concrete business also posted strong growth with revenues more than doubling year-on-year driven by a record high volume level for the quarter and higher prices. Volumes benefit from the current infrastructure works in the market where we operate. In Paraguay, we delivered 73% increase in revenues compared to the prior year quarter, supported by a continual appreciation of the Guaraní against the Argentine pesos. During the quarter, the improvement in market share partly offset the construction of the…

Now please turn to slide 10. Looking towards the full year we remain cautiously optimistic as we continue to balance the growth and profitability, leveraging our leadership position in challenging macro environment. Given the contraction on cement demand, and the quarter over the last month, we are expanding cement demand very similar to those in 2017. We will continue to focus in delivering margin and profitability improvement in our different segment. The expansion of our L’Amalí plant is an important element of our long-term growth strategy, and we continue to make progress with this project. Expansion will not only allow us to relate production efficiency and that support profitability, but it will also provide much needed capacity for when demand [Indiscernible] This ends our prepared remarks. We are now ready to take questions. Operator, please open the call for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Daniel Sasson with Itau BBA. Please go ahead with your question.

Hi, Marcos, Sergio thanks for taking my questions. Congratulations on the results. My first question is on the performance of this cement, masonry & lime business in Argentina, specifically on prices you are able to increase prices by almost 20% quarter-on-quarter. How sustainable is that? Asking another way, what's the limit for you to continue raising prices? What are the pushbacks you're receiving in the negotiations? Is that sustainable going into the fourth quarter? If you could give us some color on that, that would be great? And my second question, if you could remind us, what's the percentage of your CapEx for L’Amalí that is denominated in pesos, because I expected that the total CapEx for the project that US$350 million should be actually slightly lower than that, right because of the peso depreciation, which would obviously improve the returns on equity expected for the project. Those would be my questions. Thank you.

Good morning, Daniel thank you very much for your questions. So regarding your question about prices, we will not give guidance, specific guidance about that, but we can tell you that the increases were very much in line with the public information from the index. So regarding our margins, what we can tell you is that, currently the margins are in the same level or even higher than what we published in the third quarter, and the perspectives are we can say that are also in line. So again, our strategy would be to balance our profitability and our market position. And we will try to increase our prices in order to compensate our cost inflation. Regarding the L'Amalí expansion, CapEx around 50% of the CapEx is linked to peso, Argentina peso and the other 50% in U.S. dollars. So regarding the share of the CapEx in Argentinean peso, that has a formula for the adjustment of that amount that follows the different indicators, therefore we expect the total amount to be closer to US$320 million.

Thanks a lot. Thank you Sergio.

Thank you, Daniel.

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

Good morning, [Indiscernible] and congratulations on the results. My question is looking forward with the L'Amalí expansion and with the weaker demand outlook. I'm wondering if you could talk about what your base case plan is for shutting down capacity when L'Amalí comes online, and if you have any type of updated expectation as to how that would affect the either cash cost of production or limit the margin improvement that you anticipated from L'Amalí given your current demand forecasts? Thanks.

Thank you Dan for your question. So as we always said L'Amalí project has many advantages and one is the overall cost improvement. The L'Amalí 2 production cost we estimate that is going to be the lowest among all our facilities. And the arrangement of the new production scheme it will depend also on the different dynamics in the different regions of the country as the logistic cost also has a big impact. Therefore in the future, with the L'Amalí 2 we are going to slow down production in different facilities, trying to optimize the buy over cost, the fixed cost and the logistic cost.

Are you able to give a tonnage figure on that or with specific plans or is it too early to say?

Without doubt, of course taking into account the business between the Olavarria and [Indiscernible] facilities to the L'Amalí plant, these are the most probable facilities are going to be slowing down its production. And also take into account that the viable cost differential between the L'Amalí and the average is about US$15 spot on.

Perfect. Thank you very much.

Thank you.

And your next question comes from [Indiscernible] Morgan Stanley. Please go ahead.

Hi, good morning and thank you for the call. Just very quick two questions. The first one is related to raw materials. Last quarter you were mentioning that Pet Coke is typically brought in advance and therefore you have an FX advantage in this sense. So I was wondering if you could talk a little bit about the inventory turnover for Pet Coke and U.S. dollar denominated raw materials and how long do you expect this sort of inventory hedge to continue playing out of the cash cost level. And then my second question is related to demand, you were talking earlier on infrastructure and public works in Buenos Aires. So I was wondering if you could give us an outlook of what are you expecting in this sense, and also in housing if you can give us some color that would be very helpful? Thank you.

Good morning Alexandra [Ph]. Thank you very much for your questions. So regarding the pet coke, the A little bit cold. Okay. But I think I mean this is so subtle in electronic pet coke a miracle if you are up massive dog out but Daniel so regarding the pet coke dog that we were carrying on our inventories it was basically consume, and the remaining we're going to be consuming it along the year. And also regarding the pet coke, since the gas, the natural gas production in Argentina is increasing, the availability of natural gas is also increasing. And these higher availability of natural gas has basically a higher impact or benefit in the air from the environmental perspective, the cost per perspective and also the operational perspective in our facilities. So and also regarding the infrastructure plan, the public works, they are planned, they are being executed. And what we see is that many of them are also moving into the -- are also being executed into 2019 and some of them ending by midyear, next year. And also we see both at the national level and the provincial level that there are some projects that are being talked about and regarding the [Indiscernible] this is also something that we expect to have an impact next year.

Thank you very much. This was very helpful.

Thank you, [Indiscernible].

And our next question comes from Dan Altman with Bradesco BBI. Please go ahead with your question.

Hi, good afternoon and thanks for the very good disclosure and your report again this quarter. Just a question on your comment regarding being cautiously optimistic. It seems like the guidance that you're giving in your release is very short term related to how this year will end, but I'm wondering given the projection that you have in your presentation for say minus 1% GDP growth next year. I'm wondering if that's part of your cautious optimism. Do you see -- do you have this ability you know beyond the next you know the next month or two. And what is it that makes you optimistic about the current fundamentals in Argentina? Thanks.

Good morning, Dan. Thank you for your question. Well we say that we are cautiously optimistic, it has to do with that, during the last month of this year, we see of course a lower in demand and this we expect to be also stepping into the beginning of next year, but by the second half we expect a recovery. There are some talks about projects and some different sorts of information that give us the hands that by the second half there is going to be a higher activity and that is why we expect also a higher demand. So as you know we do not give guidance regarding the next year figures, but taking a look through the history and the correlation between the cement industry and the GDP, there is a – you have this multiplier two times.

Okay great.

Thank you Dan.

[Operator Instructions] And our next question comes from Andressa Varotto with UBS. Please go ahead with your question.

Hi, thank you very much for taking my questions. First, I wanted to ask you if you could elaborate on cost controls. And second, we saw your SG&A expenses like it inflation, so along which lines is the company being able to contain expense growth? And lastly, just wanted to confirm if a pricing strategy focus is to preserve margins in terms of EBITDA per ton, or gross profit per ton in USD terms? Thank you.

Good morning Andressa. Thank you for your question. When we talk about cost control, what we say is that the company has different measures for the cost control. And here, we not only take into account the performance of the – of our facilities, but also the cost controls in the tariffs, both in expenditures and different costs. In situations like currently in Argentina with very high inflation, our experience in order to manage different relative prices, it has an impact on our results. And could you please repeat your second question please?

Yes, sir. The second question is more specific on SG&A expenses as these [Indiscernible] inflation, so just curious to know among which lines is the company being able to contain expense growth. And lastly, I just wanted to confirm if your pricing strategy for – business margins in terms of EBITDA per ton or gross profit per ton in U.S. dollars? Thank you.

So regarding the SG&A question, we do have control in all the lines of this expenditures. But in this quarter in particularly we have an important savings in freight and tax. So once again this freight and tax, these are the most important, but we always keep focus in all the expenditures especially in this current situation with the high inflation and price changes. So regarding your profit question, we take into account different indicators to measure profit. But we prefer to choose the EBITDA per ton, both as percentages of revenues and measured in U.S. dollar.

That was great. Thank you very much.

Thanks.

And at this point, there are no further questions. This concludes our question and answer session. I'd like to turn the conference back over to 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 we provide financial and business updates next quarter. In the interim, the team remains available to answer any questions you may have. Thank you and enjoy the rest of the day.

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