Loma Negra Rises in Trading Debut After $954 Million IPOBy and
Shares climb up to 17% in biggest Argentine IPO since 1993
Loma Negra poised to benefit from Macri’s infrastructure push
Loma Negra Cia Industrial Argentina SA rose as much as 17 percent in its U.S. trading debut after the biggest IPO by an Argentine company in more than two decades, offering shares in both the U.S. and its home country.
The American depositary shares for Loma Negra, the largest cement producer in Argentina, increased 15 percent to $21.77 at 2 p.m. in New York. The company and one of its selling shareholders raised $954 million selling the equivalent of 50.2 million American depositary shares at $19 each, the high end of the marketed range.
It’s the largest IPO by an Argentine company since YPF SA raised $2.7 billion in 1993, according to data compiled by Bloomberg.
The company plans to trade in two venues, according to a filing with the U.S. Securities and Exchange Commission. Its American depositary shares, which equal five ordinary shares according to the filing, trade on the New York Stock Exchange. Loma Negra intends to apply to list the equivalent of 30 million ordinary shares on the Bolsas y Mercados Argentinos.
Loma Negra pitched itself as a bet on a the economic upturn in Argentina. In the second quarter, the country’s economy expanded at the fastest pace since 2015, complete with a construction boom that is gassing up demand for cement. President Mauricio Macri is pushing a plan of at least $26 billion for infrastructure, while building activity has expanded by more than 10 percent each month since March.
Loma Negra sees 30 percent of cement consumption coming from infrastructure, with the rest from housing and other construction linked to economic growth, Chief Executive Officer Sergio Faifman said Wednesday in a phone interview. The company also expects to increase its cement prices in Argentina.
“Argentina had price controls for many years, so the price fell below reasonable levels,” Faifman said. “As market leaders, and along with the government’s vision of the country, we don’t believe it’s rational to hike the price in one go, but to do it gradually. Our leadership in the market and our national presence gives us the strength to say, we’ll raise prices gradually.”
The region’s economic malaise has forced many companies to delay planned IPOs, including Votorantim, Brazil’s largest cement maker, in 2013. The most recent building-materials IPO in Latin America was Mexico’s Elementia in July 2015.
Loma Negra, which has a market share of 45 percent in Argentina, wants to use $350 million of the proceeds to more than double the capacity of its L’Amali cement plant in Buenos Aires province to 4.9 million tons by 2020 to meet the country’s rising demand and reduce operating costs. The nearly century-old company produces and distributes cement, concrete and lime. It estimates that its existing quarries have enough reserves to support its operations for more than an additional 100 years, according to a filing.
“This deal is attractive to get exposure to Argentina’s ambitious infrastructure plan,” Rodrigo Nistor, a corporate analyst at Buenos Aires-based brokerage TPCG, wrote in a note. “The cement market in Argentina is underdeveloped when compared to other countries in the region.”
Loma Negra posted net income of $30 million in 2016 on net revenue of $595 million, according to its U.S. filing. In the first six months of this year, the company saw net profit of $42 million on net revenue of $402 million.
Owner Camargo Correa, which bought Loma Negra in 2005 for about $1 billion from Amalia Lacroze de Fortabat, is looking to use $703 million of its proceeds to repay a portion of its outstanding debt, according to the filing. The company has been selling assets as it pays fines related to the country’s largest-ever corruption investigation that has engulfed state-run oil company Petroleo Brasileiro SA. The company also has high amounts of dollar-denominated debt it used to purchase Portugal’s Cimpor at 5.5 euros per share, which it later de-listed at 36 euro cents.
“The initial plan had been to list the Brazilian subsidiary, but the market did not allow them to do that,” said London-based Bloomberg Intelligence analyst Sonia Baldeira. “Now the Argentine market is very promising and the solution to IPO this unit seems quite interesting.”
Loma Negra sold the equivalent of 6 million American depositary shares, according to the filing in Argentina, while 44.2 million were coming from a holding company that through Camargo Correa is indirectly owned and controlled by InterCement Participacoes SA.
Yields on InterCement bonds due in 2024 fell to 6.3 percent, the lowest since 2014, following the successful capital raise.
Argentina’s equity markets are gaining momentum, with $3.5 billion ready to go public as some of the country’s largest companies look to raise capital for the first time. The equity pipeline solidified after Macri’s pro-market party made a strong showing in August’s mid-term primaries. Investors are looking for him to now push through needed labor and tax changes after his ruling coalition did better than expected in the final vote in October.
Bank of America Corp., Bradesco BBI SA, Citigroup Inc., HSBC Holdings Plc, Itau BBA and Morgan Stanley led the offering, according to the filing with the SEC. The company’s U.S.-listed shares trade on the New York Stock Exchange under the ticker LOMA.
— With assistance by Eugenio Lobo