LOMA Loma Negra Compania Industrial Argentina Socieded Anonima

(All amounts are expressed in thousands of Argentine pesos - $ - except otherwise indicated)

 

-	Registration of the bylaws: August 5th, 1926, under No 38, Book 46.

-	Last amendment registered to the bylaws: July 13th, 2021, under No. 10,675 Book 103 of Companies by shares.

-	Correlative Number of Registration with the IGJ: 1,914,357.

-	Tax identification number [CUIT]: 30-50053085-1.

-	Date of expiration: July 3, 2116.

LOMA NEGRA COMPAÑÍA INDUSTRIAL ARGENTINA SOCIEDAD ANÓNIMA

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2022 AND 2021

(All amounts are expressed in thousands of Argentine pesos - $ - except otherwise indicated)

2.            BASIS OF PREPARATION

	Main business		Country		% of direct and indirect ownership as of
					06.30.22	12.31.21	06.30.21
Subsidiary name:
Cofesur S.A.U.	Investment		Argentina		100.00	100.00	100.00
Ferrosur Roca S.A. (1)	Rail freight transportation		Argentina		80.00	80.00	80.00
Recycomb S.A.U.	Waste recycling		Argentina		100.00	100.00	100.00
(1)   Directly controlled by Cofesur S.A.U.

LOMA NEGRA COMPAÑÍA INDUSTRIAL ARGENTINA SOCIEDAD ANÓNIMA

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2022 AND 2021

(All amounts are expressed in thousands of Argentine pesos - $ - except otherwise indicated)

			06.30.2022				12.31.2021
Current assets			1,447,872				1,458,204
Non-current assets			1,790,169				2,501,050
Current liabilities			2,134,986				2,091,589
Non-current liabilities			540,539				726,196
Equity attributable to the owners of the company			450,012				913,176
Non-controlling interests			112,503				228,294

			06.30.2022				06.30.2021
Six-month period
Sales revenues			4,052,155				3,751,372
Financial results, net			93,087				75,563
Depreciations			(931,824	)			(706,845	)
Income tax			118,539				(24,704	)
Loss for the period (*)			(578,955	)			(552,849	)
(*) The net loss as of June 30, 2022 includes a gain of 12,685 from eliminations of intragroup transactions.
			06.30.2022				06.30.2021
Six-month period
Net cash generated by operating activities			249,888				497,157
Net cash used in investing activities			(313,485	)			(454,427	)
Net cash generated (used in) by financing activities			132,384				(34,574	)
Financial and holding results generated by cash			(6,692	)			(15,521	)

 

2.3 Accounting policies

 

These consolidated condensed interim financial statements have been prepared using the same accounting policies and criteria used in the preparation of the audited consolidated financial statements for the year ended December 31, 2021, except for the adoption of new standards and interpretations effective as of January 1, 2022, if any.

2.3.1 Application of new and revised International Financial Reporting Standards (IFRS)

•	Adoption of new and revised IFRS

The Group has adopted all of the new and revised standards and interpretations issued by the International Accounting Standards Board (“IASB”) that are relevant to its operations and that are mandatorily effective as of June 30, 2022, as described in Note 2.2 to the Group's annual consolidated financial statements as of December 31, 2021. 

The Group has not opted for early adoption of any other standard, interpretation or amendment that has been issued but is not yet in force.

•	New standards

New standards and interpretations issued during the six-month period ended June 30, 2022 and the standards and interpretations issued but not mandatory as of that date are described in Note 2.2 to the consolidated financial statements as of December 31, 2021.

Free translation in English of the original consolidated financial statements filed in Spanish with the Argentine National Securities Commission (“CNV”). In case of discrepancy, the consolidated financial statements filed with the CNV prevail over this free translation.

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LOMA NEGRA COMPAÑÍA INDUSTRIAL ARGENTINA SOCIEDAD ANÓNIMA

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2022 AND 2021

(All amounts are expressed in thousands of Argentine pesos - $ - except otherwise indicated)

 

3.            CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES USED FOR ESTIMATING UNCERTAINTY

 

In the application of the Group´s accounting policies, the Group´s management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are relevant. Actual results may differ from these estimates.

In the ordinary course of its business, the Group selects tax criteria and accounting positions based on a reasonable interpretation of current regulations, also taking into account the opinion of its tax and legal advisors together with the evidence available up to the date of issue of these financial statements. However, there may be situations in which the assessment that a third party could make of them and the eventual realization of damage to the Group is uncertain. For such cases, the Group has evaluated the issues considering their significance in relation to the financial statements and has not made a provision as it is not required by current accounting standards.

Underlying estimates and assumptions are continuously reviewed. Changes in estimates are accounted for prospectively.

The unaudited consolidated condensed interim financial statements reflect all adjustments which are, in the opinion of Management, necessary to make a fair statement of the results for the interim periods presented.

There are no significant changes to the critical judgements used by Management in applying accounting policies to the critical judgements disclosed in the annual consolidated financial statements for the year ended December 31, 2021, including those derived from the definition of the completion period of the current Ferrosur Roca S.A. concession mentioned in Notes 1 and 29.

As a consequence of the activities in which the Group is engaged, its transactions do not have a significant cyclical or seasonal character. Nevertheless, during the second half of the year, the volume of sales in Argentina has historically showed a slight increase.

 

4.            REVENUES

			06.30.2022				06.30.2021
Six-month period
Sales of goods			65,807,802				64,810,796
Domestic market			65,785,133				64,754,615
External customers			22,669				56,181
Services rendered			2,226,159				2,102,443
(-) Bonus / Discounts			(20,114,867	)			(19,542,019	)
Total			47,919,094				47,371,220

Free translation in English of the original consolidated financial statements filed in Spanish with the Argentine National Securities Commission (“CNV”). In case of discrepancy, the consolidated financial statements filed with the CNV prevail over this free translation.

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LOMA NEGRA COMPAÑÍA INDUSTRIAL ARGENTINA SOCIEDAD ANÓNIMA

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2022 AND 2021

(All amounts are expressed in thousands of Argentine pesos - $ - except otherwise indicated)

 

5.            COST OF SALES

							06.30.2022								06.30.2021
Six-month period
Inventories at the beginning of the year							16,040,484								15,717,283
Finished products			810,323								968,044
Products in progress			2,730,455								1,849,513
Raw materials, materials, fuel and spare parts			12,499,706								12,899,726
Purchases and production expenses for the period							35,986,347								33,127,604
Inventories at the end of the period							(18,758,778	)							(17,212,095	)
Finished products			(813,631	)							(924,719	)
Products in progress			(3,815,020	)							(3,157,061	)
Raw materials, materials, fuel and spare parts			(14,130,127	)							(13,130,315	)
Cost of sales							33,268,053								31,632,792

The detail of production expenses is as follows:

			06.30.2022				06.30.2021
Six-month period
Fees and service fees			661,878				634,975
Salaries, wages and social security contributions			5,470,601				5,315,388
Transport and travelling expenses			246,328				226,312
Data processing			16,994				15,824
Taxes, contributions and commissions			644,331				662,831
Depreciation and amortizations			4,380,779				3,647,602
Preservation and maintenance costs			2,914,209				3,032,982
Communications			34,636				32,259
Leases			60,209				32,645
Employee benefits			134,537				129,959
Water, natural gas and energy services			8,985				7,447
Freight			3,676,031				3,258,545
Fuel			4,975,042				4,267,921
Insurance			117,911				88,850
Packaging			1,231,480				1,388,416
Electrical power			3,237,265				3,309,732
Contractors			2,466,231				2,455,563
Tolls			-				10,100
Canon (concession fee)			30,208				29,524
Security			170,826				168,475
Others			503,446				438,360
Total			30,981,927				29,153,710

Free translation in English of the original consolidated financial statements filed in Spanish with the Argentine National Securities Commission (“CNV”). In case of discrepancy, the consolidated financial statements filed with the CNV prevail over this free translation.

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LOMA NEGRA COMPAÑÍA INDUSTRIAL ARGENTINA SOCIEDAD ANÓNIMA

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2022 AND 2021

(All amounts are expressed in thousands of Argentine pesos - $ - except otherwise indicated)

 

6.            SELLING AND ADMINISTRATIVE EXPENSES

 

			06.30.2022				06.30.2021
Six-month period
Managers and directors compensation and fees			350,955				299,254
Fees and compensation for services			341,118				324,245
Salaries, wages and social security contributions			1,070,667				973,534
Transport and travelling expenses			43,870				27,525
Data processing			140,597				89,598
Advertising expenses			143,173				130,117
Taxes, contributions and commissions			1,024,231				1,053,979
Depreciation and amortizations			285,822				272,530
Preservation and maintenance costs			6,602				9,796
Communications			38,923				26,999
Leases			10,977				13,927
Employee benefits			29,107				28,211
Water, natural gas and energy services			1,799				2,649
Freight			641,195				567,835
Insurance			141,417				81,725
Allowance for doubtful accounts			8,171				3,791
Security			9,995				8,226
Others			61,823				67,450
Total			4,350,442				3,981,391

 

7.            OTHER GAINS AND LOSSES

 

			06.30.2022				06.30.2021
Six-month period
Gain on disposal of property, plant and equipment			13,860				122,696
Donations			(13,721	)			(53,567	)
Technical assistance services provided			2,269				3,302
Gain on tax credit acquired			33,855				46,439
Contingencies			(106,796	)			(28,977	)
Leases			44,013				90,441
Miscellaneous			38,686				35,954
Total			12,166				216,288

8.            TAX ON BANK ACCOUNTS DEBITS AND CREDITS

The general tax rate on bank debits and credits is 0.6% for the amounts debited and credited in the bank accounts of the Group. For the amounts debited and credited, 33% of both items may be taken as payment on account of other taxes. The 67% of the tax paid is included in this line item in the statement of profit or loss and other comprehensive income.

Free translation in English of the original consolidated financial statements filed in Spanish with the Argentine National Securities Commission (“CNV”). In case of discrepancy, the consolidated financial statements filed with the CNV prevail over this free translation.

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LOMA NEGRA COMPAÑÍA INDUSTRIAL ARGENTINA SOCIEDAD ANÓNIMA

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2022 AND 2021

(All amounts are expressed in thousands of Argentine pesos - $ - except otherwise indicated)

 

9.            FINANCIAL RESULTS, NET

 

			06.30.2022				06.30.2021
Six-month period
Exchange rate differences
Foreign exchange gains			-				458,935
Foreign exchange losses			(578,377	)			(103,621	)
Total			(578,377	)			355,314
Financial income
Unwinding of discounts on provisions and liabilities			77,019				221,980
Total			77,019				221,980
Financial expenses
Interest from short-term investments			(620,659	)			(943,052	)
Interest on borrowings			(161,486	)			(319,476	)
Interest on leases			(17,738	)			(42,051	)
Tax interest			(8,140	)			(68,692	)
Unwinding of discounts on receivables			(73,081	)			(62,864	)
Others			(292,718	)			(325,734	)
Total			(1,173,822	)			(1,761,869	)

 

10.            INCOME TAX EXPENSE

 

Income tax expense is recognized on the basis of the actual profit for the period and the statutory rate expected at year-end.

This criterion does not significantly differ from the criterion established in IAS 34, which requires income tax expense to be recognized in each interim period based on the best estimate of the effective tax rate expected as of year-end.

In this regard, Law No. 27,260, promulgated on June 16, 2021, incorporated modifications on the corporate income tax rate, establishing a tiered structure of the applicable rates based on the level of accumulated taxable net income for each company, which can be 25%, 30% and 35%; maintaining the tax of 7% on the distribution of dividends.

The main accounting impact of the new regulations is the measurement of deferred income tax assets and liabilities, since these must be recognized by applying the tax rate that will apply to the Company on the dates on which the differences between the accounting values and the tax will be reversed or used. For this reason, the Group has considered its tax projections to establish the estimate rate that will apply in each year, in order to determine the value of temporary items and tax losses based on the estimated term of reversion and consumption.

The reconciliation of income tax expense for the six-month periods ended June 30, 2022 and 2021 and that which would result from applying the statutory rate in force on the net profit before income tax expense that arises from the condensed interim statement of profit or loss and other comprehensive income for each period is as follows:

Free translation in English of the original consolidated financial statements filed in Spanish with the Argentine National Securities Commission (“CNV”). In case of discrepancy, the consolidated financial statements filed with the CNV prevail over this free translation.

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LOMA NEGRA COMPAÑÍA INDUSTRIAL ARGENTINA SOCIEDAD ANÓNIMA

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2022 AND 2021

(All amounts are expressed in thousands of Argentine pesos - $ - except otherwise indicated)

			06.30.2022				06.30.2021
Total profit before income tax expense			9,782,512				12,221,812
Statutory income tax rate			35	%			35	%
Income tax at statutory rate			(3,423,879	)			(4,277,634	)
Adjustments for calculation of the effective income tax:
Effects of the fiscal revaluation and adjustment to reflect inflation for accounting and tax purposes			(250,873	)			(79,464	)
Change in tax rate			728				(5,250,755	)
Impairment of tax losses recognized in subsidiaries			(13,691	)			-
Other non-taxable income or non-deductible expense, net			(5,026	)			(17,436	)
Total income tax expense			(3,692,741	)			(9,625,289	)
INCOME TAX
Current			(2,249,628	)			(5,348,735	)
Deferred			(1,443,113	)			(4,276,554	)
Total			(3,692,741	)			(9,625,289	)

Likewise, the breakdown of deferred income as of June 30, 2022 and December 31, 2021 is as follows:

			06.30.2022				12.31.2021
Deferred tax assets
Loss carryforward from subsidiary			252,550				350,185
Leases			-				4,018
Provisions			117,972				113,023
Accounts payable			50,632				-
Other receivables			54,668				90,735
Salaries and social security payables			33,806				40,720
Other liabilities			98,911				100,232
Trade accounts receivable			2,010				2,376
Others			5,259				5,996
Total deferred tax assets			615,808				707,285
			30,06,2022				31,12,2021
Deferred tax liabilities
Investments			(90,611	)			(11,371	)
Property, plant and equipment			(18,772,700	)			(16,354,859	)
Inventories			(1,565,346	)			(1,765,037	)
Taxes payable (adjustment to reflect inflation for tax purposes)			(1,084,886	)			(2,059,488	)
Borrowings			(22,599	)			(2,329	)
Leases			(7,400	)			-
Others			(1,406	)			(228	)
Total deferred tax liabilities			(21,544,948	)			(20,193,312	)
Total net deferred tax liabilities			(20,929,140	)			(19,486,027	)

Free translation in English of the original consolidated financial statements filed in Spanish with the Argentine National Securities Commission (“CNV”). In case of discrepancy, the consolidated financial statements filed with the CNV prevail over this free translation.

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LOMA NEGRA COMPAÑÍA INDUSTRIAL ARGENTINA SOCIEDAD ANÓNIMA

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2022 AND 2021

(All amounts are expressed in thousands of Argentine pesos - $ - except otherwise indicated)

 

11.            EARNINGS PER SHARE

Basic and diluted earnings per share

The earnings and the weighted average number of common shares used in the calculation of basic and diluted earnings per share are as follows:

		Six months								Three months
			06.30.2022				06.30.2021				06.30.2022				06.30.2021
Profit attributable to the owners of the parent company used in the calculation of earnings per share - basic and diluted			6,205,561				2,707,090				2,488,927				(2,024,548	)
Weighted average number of common shares for purposes of basic and diluted earnings per share (in thousands)			585,711				596,026				585,401				596,026
Basic and diluted earnings per share (in pesos)			10.5949				4.5419				4.2517				(3.3967	)

 

12.            PROPERTY, PLANT AND EQUIPMENT

 

			06.30.2022				12.31.2021
Cost			261,426,720				259,742,746
Accumulated depreciation			(153,504,374	)			(149,057,680	)
Total			107,922,346				110,685,066
Land			1,395,977				1,395,977
Plant and buildings			17,880,720				18,677,686
Machinery, equipment and spare parts			79,107,571				78,889,927
Transport and load vehicles			1,598,521				2,025,310
Furniture and fixtures			97,496				129,308
Quarries			6,659,793				6,846,496
Tools			118,534				140,338
Construction in progress			1,063,734				2,580,024
Total			107,922,346				110,685,066

Free translation in English of the original consolidated financial statements filed in Spanish with the Argentine National Securities Commission (“CNV”). In case of discrepancy, the consolidated financial statements filed with the CNV prevail over this free translation.

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LOMA NEGRA COMPAÑÍA INDUSTRIAL ARGENTINA SOCIEDAD ANÓNIMA

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2022 AND 2021

(All amounts are expressed in thousands of Argentine pesos - $ - except otherwise indicated)

13.            INVENTORIES

 

			06.30.2022				12.31.2021
Non-current
Spare parts			4,515,799				4,437,318
Allowance for obsolete inventories			(198,300	)			(238,416	)
Total			4,317,499				4,198,902
Current
Finished products			813,631				810,323
Production in progress			3,815,020				2,730,455
Raw materials, materials and spare parts			7,566,404				7,078,433
Fuels			2,246,224				1,222,371
Total			14,441,279				11,841,582

 

14.            RELATED PARTY TRANSACTIONS AND BALANCES

 

The outstanding balances between the Group and related parties as of June 30, 2022 and December 31, 2021 are as follows:

			06.30.2022				12.31.2021
Related companies:
InterCement Brasil S.A.
Accounts payable			(111,373	)			(135,358	)
InterCement Trading e Inversiones S.A.
Other receivables			311,387				359,656
Accounts payable			(24,396	)			(29,644	)
Intercement Participações S.A.
Other receivables			245,974				240,911
Accounts payable			(90,588	)			(370,980	)
InterCement Trading e Inversiones Argentina S.L.
Other receivables			85,182				-

Summary of balances as of June 30, 2022 and December 31, 2021 is as follows:

			06.30.2022				12.31.2021
Other receivables			642,543				600,567
Accounts payable			(226,357	)			(535,982	)

The transactions between the Group and related parties for the periods ended June 30, 2022 and 2021 are detailed as follows:

			06.30.2022				06.30.2021
InterCement Participações S.A. – Sales of services			30,626				98,707
InterCement Participações S.A. – Services received			(453,455	)			(464,919	)

The amount recognized in the consolidated statement of profit or loss and other comprehensive income related to key management salaries, wages and fees amounted to 288,236 and 226,999 for the six-month periods ended June 30, 2022 and 2021, respectively. Additionally, a loss has been accrued under the long-term incentive program for a total of 14,813 and 43,939 during the six-month periods ended June 30, 2022 and 2021, respectively. Finally, during the current period, 10,069 American Depositary Receipts (“ADRs”) were distributed within the framework of the aforementioned incentive programs.

Free translation in English of the original consolidated financial statements filed in Spanish with the Argentine National Securities Commission (“CNV”). In case of discrepancy, the consolidated financial statements filed with the CNV prevail over this free translation.

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LOMA NEGRA COMPAÑÍA INDUSTRIAL ARGENTINA SOCIEDAD ANÓNIMA

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2022 AND 2021

(All amounts are expressed in thousands of Argentine pesos - $ - except otherwise indicated)

The Group did not recognize any expense in the current period, or in previous ones, regarding bad or doubtful accounts related to amounts owed by related parties.

The outstanding amounts as of June 30, 2022 are not secured and will be settled in cash. No guarantees have been granted or received on the outstanding balances.

On April 14, 2002, the Company's Board of Directors approved the payment of a cash dividend for a total amount of 5,696,563 and communicated that as a general principle the payment of such dividends will be made to all Shareholders in ARS. However, all shareholders were guaranteed the option of receiving payment of their proportion of the dividend in the equivalent in US Dollars, converting the original dividend into pesos at the exchange rate “Reference Exchange Rate of the Central Bank of the Republic Argentina-Com. “A” 3500” corresponding to the close of the business day immediately prior to the day of availability; and, in such case, grant shareholders the option of receiving the payment of the dividend in US Dollars through Caja de Valores S.A., in their local bank account or in a bank account abroad.

 

15.            OTHER RECEIVABLES

 

			06.30.2022				12.31.2021
Non-current
Advances to suppliers			522,174				658,472
Tax credits			87,519				112,615
Contributions to the Trust Fund to Strengthen the Inter-urban Railroad System (F.F.F.S.F.I.)			245,161				247,124
Prepaid expenses			234,554				175,286
Guarantee deposits			-				81
Subtotal			1,089,408				1,193,578
Allowance for doubtful receivables			(245,161	)			(247,124	)
Total			844,247				946,454
			06.30.2022				12.31.2021
Current
Income tax credits			267,400				-
Turnover tax credits			159,684				136,604
Value added tax			26,303				-
Other tax credits			1,287				-
Credit for sale of interest in Yguazu Cementos S.A.			312,891				419,359
Related parties’ receivables (Note 14)			642,543				600,567
Prepaid expenses			238,574				322,091
Guarantee deposits			856				1,165
Reimbursements receivable			8,949				16,331
Advances to suppliers			20,463				25,031
Salaries advances and loans to employees			6,570				13,110
Receivables from sales of property, plant and equipment			17,232				14,212
Miscellaneous			90,691				72,896
Total			1,793,443				1,621,366

 

16.            RIGHT OF USE OF ASSETS AND LEASE LIABILITIES

 

The Group has entered into lease agreements primarily for the lease of offices and premises. The evolution of the right of use of assets and lease liabilities as of June 30, 2022 and December 31, 2021 is as follows:

Free translation in English of the original consolidated financial statements filed in Spanish with the Argentine National Securities Commission (“CNV”). In case of discrepancy, the consolidated financial statements filed with the CNV prevail over this free translation.

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LOMA NEGRA COMPAÑÍA INDUSTRIAL ARGENTINA SOCIEDAD ANÓNIMA

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2022 AND 2021

(All amounts are expressed in thousands of Argentine pesos - $ - except otherwise indicated)

			06.30.2022				12.31.2021
Lease liabilities:
At the beginning of the period / year			428,503				1,090,864
Additions			21,264				77,928
Interest accrued in the period / year			15,626				58,797
Foreign exchange gain			(40,269	)			(146,072	)
Decrease			-				(412,383	)
Payments			(78,928	)			(240,631	)
At the end of the period / year			346,196				428,503

Right of use assets:
At the beginning of the period / year			421,909				919,480
Additions			21,264				77,928
Depreciations			(75,837	)			(193,403	)
Decrease			-				(382,096	)
At the end of the period / year			367,336				421,909

 

17.            TRADE ACCOUNTS RECEIVABLE

 

			06.30.2022				12.31.2021
Accounts receivable			5,920,988				5,616,047
Accounts receivable in litigation			301,088				84,585
Notes receivable			17,443				41,800
Foreign customers			5,789				4,037
Subtotal			6,245,308				5,746,469
Allowance for doubtful accounts			(309,930	)			(353,725	)
Total			5,935,378				5,392,744

 

18.            INVESTMENTS

 

			06.30.2022				12.31.2021
Non-current
Investments in other companies
- Cementos del Plata S.A.			7,153				7,153
Total			7,153				7,153
Current
Short-term investments
- Mutual funds in pesos			9,467,590				1,654,308
- Fix-term deposits in pesos			-				2,396,169
- Short-term investments in foreign currency			659,495				-
- Public securities in pesos			2,395,145				2,675,865
Total			12,522,230				6,726,342

Free translation in English of the original consolidated financial statements filed in Spanish with the Argentine National Securities Commission (“CNV”). In case of discrepancy, the consolidated financial statements filed with the CNV prevail over this free translation.

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LOMA NEGRA COMPAÑÍA INDUSTRIAL ARGENTINA SOCIEDAD ANÓNIMA

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2022 AND 2021

(All amounts are expressed in thousands of Argentine pesos - $ - except otherwise indicated)

19.            CAPITAL STOCK AND OTHER CAPITAL RELATED ACCOUNTS

 

			06.30.2022				12.31.2021
Capital			59,603				59,603
Adjustment to capital			9,815,470				9,815,470
Cost of treasury stock			(3,955,804	)			(3,250,291	)
Share-based payment plans			68,809				54,285
Treasury stocks trading premium			9,670				-
Share premium			17,831,024				17,831,024
Merger premium			3,221,015				3,221,015
Total			27,049,787				27,731,106

The issued, paid-in and registered capital, consists of:
Common stock with a face value of $ 0.1 per share and entitled to 1 vote each, fully paid-in (in thousand)			596,026				596,026

Acquisition of treasury stock

During the previous year and the present period, the Company carried out various plans for the acquisition of treasury stock, as detailed in note 23 to the financial statements for the year ended December 31, 2021.

Acquisitions were carried out in accordance with the market opportunities, dates, prices and quantities established by the Company’s Management.

The purpose of the repurchase plan is to efficiently dispose of a portion of the Company’s liquidity, which may result in a greater return of value to the shareholders considering the current attractive value of the share.

On February 21, 2022, the last plan to acquire treasury stocks was finalized, having reached a purchase amount of 711 million corresponding to the purchase of shares and 10,069 ADRs. On January 5, 2022, 10,069 ADRs were distributed under the long-term incentive program (Note 14).

Until the date of issuance of these financial statements, the Company acquired 10,625,520 treasury stocks for a total amount of 3,955,804.

 

20.            BORROWINGS

 

20.1 Composition of borrowings

 

	06.30.2022					12.31.2021
	Company	Interest rate	Maturity date	Amount		Amount
Borrowings in foreign currency – USD
Industrial and Commercial Bank of China	Loma Negra C.I.A.S.A.	6 Month-Libor + 4.25%	Jan-22	-		124,921
Industrial and Commercial Bank of China	Loma Negra C.I.A.S.A	6 Month-Libor + 4.25%	Feb-22	-		8,706
Industrial and Commercial Bank of China	Loma Negra C.I.A.S.A	6 Month Libor + 7.375%	Jan-22	-		996,369
Industrial and Commercial Bank of China	Loma Negra C.I.A.S.A	6 Month Libor + 7.375%	Jan-22	-		903,008
Industrial and Commercial Bank of China	Loma Negra C.I.A.S.A	6 Month-Libor + 4.25%	Mar-22	-		56,697
Industrial and Commercial Bank of China (Dubai)	Loma Negra C.I.A.S.A	3 Month-Libor + 8%	Jul-24	7,092,748		-
Industrial and Commercial Bank of China (Dubai)	Loma Negra C.I.A.S.A.	3-Month Libor + 7.5%	Nov-23	737,249		1,093,809
Total borrowings in foreign currency				7,829,997		3,183,510

Free translation in English of the original consolidated financial statements filed in Spanish with the Argentine National Securities Commission (“CNV”). In case of discrepancy, the consolidated financial statements filed with the CNV prevail over this free translation.

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LOMA NEGRA COMPAÑÍA INDUSTRIAL ARGENTINA SOCIEDAD ANÓNIMA

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2022 AND 2021

(All amounts are expressed in thousands of Argentine pesos - $ - except otherwise indicated)

	06.30.2022					12.31.2021
	Company	Interest rate	Maturity date	Amount		Amount
Borrowings in local currency
Overdrafts	Loma Negra C.I.A.S.A.	47.26%	Jul-22	5,499,820		66,483
Overdrafts	Ferrosur Roca S.A.	43%	Jul-22	268,534		168,982
Total borrowings in local currency				5,768,354		235,465
Total				13,598,351		3,418,975

(1)

In the month of April 2022, Loma Negra C.I.A.S.A. entered into a loan agreement abroad with the Industrial and Commercial Bank of China Limited for USD 56 million, whose principal payments are due in three equal installments in January, April and July 2024. Said loan is guaranteed by InterCement Participações S.A. up to 51% of its amount. Interest accrues at the Libor rate plus 8%, payable quarterly. Due to the fact that said loan has been used to pay the Company's obligations abroad, the funds from it have not been deposited or settled through the single free exchange market (“MULC”). The loan has been valued at its amortized cost in foreign currency, converting the resulting amounts to local currency at the official selling exchange rate in effect at the end of the reporting period.

(2)

On June 30, 2022, Loma Negra C.I.A.S.A. entered into a loan with Citibank N.A. for an amount of 5,500 million pesos to be paid 180 days after its execution, accruing a fixed nominal rate of 47.25% to be paid monthly.

Summary of borrowings by Company:			06.30.2022				12.31.2021
Loma Negra C.I.A.S.A.			13,329,817				3,249,993
Ferrosur Roca S.A.			268,534				168,982
Total			13,598,351				3,418,975

20.3 Movements of borrowings

 

The movements of borrowings for the six-month period ended June 30, 2022 are as disclosed below:

Balances as of January 1, 2022			3,418,975
New borrowings			14,079,095
Interest accrued			161,486
Effect of exchange rate differences			(250,092	)
Interest payments			(245,514	)
Principal payments			(3,565,599	)
Balances as of June 30, 2022			13,598,351

As of June 30, 2022, the long-term borrowings have the following maturity schedule:

Fiscal year
2023			229,073
2024			6,994,457
Total			7,223,530

 

Free translation in English of the original consolidated financial statements filed in Spanish with the Argentine National Securities Commission (“CNV”). In case of discrepancy, the consolidated financial statements filed with the CNV prevail over this free translation.

20

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LOMA NEGRA COMPAÑÍA INDUSTRIAL ARGENTINA SOCIEDAD ANÓNIMA

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2022 AND 2021

(All amounts are expressed in thousands of Argentine pesos - $ - except otherwise indicated)

21.            ACCOUNTS PAYABLE

 

			06.30.2022				12.31.2021
Suppliers			6,231,295				5,614,950
Related parties (Note 14)			226,357				535,982
Accounts payable for investments in property, plant and equipment and intangible assets			785,482				2,268,306
Expenses accrual			2,699,831				2,304,471
Total			9,942,965				10,723,709

 

22.            PROVISIONS

 

			06.30.2022				12.31.2021
Labor and social security			195,646				144,822
Environmental restoration			435,049				456,815
Civil and others			134,373				170,797
Total			765,068				772,434

Changes in the provisions were as follows:

		Labor and social security				Environmental restoration				Civil and others				Total
Balances as of January 1, 2022			144,822				456,815				170,797				772,434
Increases / (Recoveries) (*)			78,950				(20,720	)			(8,436	)			49,794
Uses (**)			(28,126	)			(1,046	)			(27,988	)			(57,160	)
Balances as of June 30, 2022			195,646				435,049				134,373				765,068

(*) Includes the effect of the inflation adjustment.

(**) Includes the application of provisions to their specific purposes.

 

23.            TAX LIABILITIES

 

			06.30.2022				12.31.2021
Income tax			92,659				3,436,745
Value added tax			850,533				683,791
Turnover tax			271,886				212,412
Other taxes, withholdings and perceptions			215,462				221,898
Total			1,430,540				4,554,846

 

24.            CASH AND CASH EQUIVALENTS

For purposes of the consolidated condensed interim statement of cash flows, cash and cash equivalents include cash, banks accounts and short-term investments with high liquidity (with maturities of less than 90 days from the date of acquisition). Cash and cash equivalents at the end of each reporting period/year as shown in the consolidated condensed interim statement of cash flows can be reconciled to the related items in the consolidated condensed interim statement of financial position as follows:

			06.30.2022				12.31.2021
Cash and banks			771,192				450,299
Short-term investments (Note 18)			10,127,085				4,050,477
Cash and cash equivalents			10,898,277				4,500,776

 

Free translation in English of the original consolidated financial statements filed in Spanish with the Argentine National Securities Commission (“CNV”). In case of discrepancy, the consolidated financial statements filed with the CNV prevail over this free translation.

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LOMA NEGRA COMPAÑÍA INDUSTRIAL ARGENTINA SOCIEDAD ANÓNIMA

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2022 AND 2021

(All amounts are expressed in thousands of Argentine pesos - $ - except otherwise indicated)

25.            FINANCIAL INSTRUMENTS

25.1 Net debt to equity ratio

The net debt to equity ratio of the reported period/fiscal year is as follows:

			06.30.2022				12.31.2021
Debt (i)			13,598,351				3,418,975
Cash and cash equivalents			10,898,277				4,500,776
Net debt			2,700,074				(1,081,801	)
Equity (ii)			98,435,856				98,723,967
Net debt to equity ratio			0.03				(0.01	)

(i) Debt is defined as current and non-current borrowings.

(ii) Shareholders’ equity includes all the non-controlling interests, which are managed as capital.

25.2 Categories of financial instruments

 

			06.30.2022				12.31.2021
Financial assets
At amortized cost:
Cash and banks			771,192				450,299
Investments			3,054,640				5,072,034
Accounts receivable			7,008,540				6,517,357
At fair value through profit and loss:
Investments			9,467,590				1,654,308
Financial liabilities
Amortized cost			28,234,993				22,376,764

25.3 Financial risks

The Group´s activities are exposed to a variety of financial risks: market risk (including foreign currency risk, interest rate risk and price risk considering the current inflation rates), credit risk and liquidity risk. The Group maintains an organizational structure and systems that allow the identification, measurement and control of the risks to which it is exposed.

These consolidated condensed interim financial statements do not include all the information and disclosures on financial risks, therefore, they should be read in conjunction with the Group´s consolidated financial statements for the fiscal years ended December 31, 2021 and 2020 issued on March 7, 2022.

Free translation in English of the original consolidated financial statements filed in Spanish with the Argentine National Securities Commission (“CNV”). In case of discrepancy, the consolidated financial statements filed with the CNV prevail over this free translation.

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LOMA NEGRA COMPAÑÍA INDUSTRIAL ARGENTINA SOCIEDAD ANÓNIMA

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2022 AND 2021

(All amounts are expressed in thousands of Argentine pesos - $ - except otherwise indicated)

25.4 Fair value measurement

Fair value measurement is described in Note 33.8 to the annual consolidated financial statements.

From December 31, 2021 through June 30, 2022, there have been no significant changes in the industry’s economic activity affecting the fair value of the Group´s financial assets and liabilities, either measured at fair value or amortized cost. In addition, there were no transfers among the different levels of fair value hierarchy to assess the fair value of the Group's financial instruments during the six-month period ended June 30, 2022.

The carrying amounts of financial assets and liabilities recognized at amortized cost, included in the consolidated financial statements as of June 30, 2022 and December 31, 2021, approximate to their fair values. Borrowings are measured at amortized cost considering the effective interest rate method, which approximate to their fair value given their cancellation period.

The Group’s Management considers that the liquidity risk exposure is low since the Group has been generating cash flows from its operating activities, supported on profits, and has access to loans and financial resources, as explained in Note 20.

25.5 Exchange risk management

The Group carries out transactions in foreign currency and is hence exposed to exchange rate fluctuations, also considering the current exchange regulations in force. Exposures in the exchange rate are managed within approved policy parameters using foreign exchange contracts.

The carrying amounts of monetary assets and liabilities stated in currencies other than the functional currency of each company consolidated at the end of the reporting period/year are as follows:

			06.30.2022				12.31.2021
Liabilities
United States Dollars			9,206,936				6,257,607
Euro			163,727				197,234
Real			60				64
Assets
United States Dollars			1,945,263				1,255,118
Euro			58,778				26,125

Foreign currency sensitivity analysis

The Group is mainly exposed to the US Dollar and euro.

The following table shows the sensitivity of the Group to an increase in the US Dollar and the Euro exchange rate. The sensitivity rate is that used when reporting to the top executive level and represents the management’s assessment of a possible reasonable change in exchange rates. The sensitivity analysis only includes outstanding foreign-currency monetary items and adjusts traslation of such items on the end of the period tems considering a reasonably possible 25% increase in the exchange rate.

		Effect of US Dollars				Effect of Euro
Loss for the period			1,815,418				26,237
Decrease in of shareholder's Equity			1,815,418				26,237

Additionally, considering the current exchange regulations existing in Argentina, the Group constantly monitors the alternatives for collecting assets and canceling liabilities in foreign currency and their corresponding impacts. The result derived from the use of financial instruments for the cancellation of operations in foreign currency is recognized at the moment in which the Group unconditionally commits or irreversibly executes such cancellation in kind. As of June 30, 2022, in the case of the use of financial instruments for the cancellation of the aforementioned operations, it would result in an exchange variation of approximately 102%.

Free translation in English of the original consolidated financial statements filed in Spanish with the Argentine National Securities Commission (“CNV”). In case of discrepancy, the consolidated financial statements filed with the CNV prevail over this free translation.

 

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LOMA NEGRA COMPAÑÍA INDUSTRIAL ARGENTINA SOCIEDAD ANÓNIMA

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2022 AND 2021

(All amounts are expressed in thousands of Argentine pesos - $ - except otherwise indicated)

26.            NON-CASH TRANSACTIONS

 

Below is a detail of the transactions that did not involve cash flow movements during the six-month periods ended June 30, 2022 and 2021, respectively:

			06.30.2022				06.30.2021
- Acquisitions of property, plant and equipment financed with trade payables			126,212				186,924
- Right of use of assets			21,264				54,032

 

27.            SEGMENT INFORMATION

The Group has adopted IFRS 8 – “Operating Segments”, that require operating segments to be identified on the basis of internal reports regarding components of the Group that are regularly reviewed by the Executive Committee, chief operating decision maker, in order to allocate resources to the segments and to assess their performance. This analysis is based on monthly information concerning historical figures of the identified segments. The information reviewed by the main decision maker basically consists in the historical details corresponding to each month accumulated until the end of the reporting period. It is for this reason that they differ from the inflation-adjusted figures as described in Note 2.2.

For the purposes of managing its business both financially and operatively, the Group has classified the operations of its businesses as follows:

i)

Cement, masonry cement and lime: this segment includes the results from the cement, masonry cement and lime business in Argentina, and comprises the procurement of raw materials from quarries, the manufacturing process of clinker / quicklime and their subsequent grinding with certain additions in order to obtain the cement, masonry cement and lime.

 

ii)	Concrete: this segment includes the results generated from the production and sale of ready-mix concrete. It also includes the delivery of the product at the worksite and, depending on the circumstances, the pumping of concrete up to the place of destination.

 

iii)	Aggregates: this segment includes the results generated from the production and sale of granitic aggregates.

 

iv)	Railroad: this segment includes the results generated from the provision of the railroad transportation service.

 

v)	Others: this segment includes the results of the industrial waste treatment and recycling business to produce materials for use as fuel.

 

Free translation in English of the original consolidated financial statements filed in Spanish with the Argentine National Securities Commission (“CNV”). In case of discrepancy, the consolidated financial statements filed with the CNV prevail over this free translation.

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LOMA NEGRA COMPAÑÍA INDUSTRIAL ARGENTINA SOCIEDAD ANÓNIMA

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2022 AND 2021

(All amounts are expressed in thousands of Argentine pesos - $ - except otherwise indicated)

 

			06.30.2022				06.30.2021
Sales revenue
Cement, masonry cement and lime			37,382,598				23,709,176
Concrete			3,328,210				2,032,725
Railroad			3,575,604				2,107,876
Aggregates			1,002,951				318,498
Others			308,128				139,751
Inter-segment eliminations			(3,270,398	)			(1,843,874	)
Subtotal			42,327,093				26,464,152
Reconciliation - Effect from restatement in constant currency			5,592,001				20,907,068
Total			47,919,094				47,371,220

			06.30.2022				06.30.2021
Cost of sales
Cement, masonry cement and lime			21,798,446				13,310,803
Concrete			3,222,173				2,186,230
Railroad			3,429,772				2,022,441
Aggregates			907,019				301,668
Others			192,231				93,259
Inter-segment eliminations			(3,270,398	)			(1,843,874	)
Subtotal			26,279,243				16,070,527
Reconciliation - Effect from restatement in constant currency			6,988,810				15,562,265
Total			33,268,053				31,632,792

			06.30.2022				06.30.2021
Selling, administrative expenses and other gains and losses
Cement, masonry cement and lime			3,176,035				1,788,893
Concrete			145,125				22,493
Railroad			196,194				127,405
Aggregates			10,249				3,805
Others			83,729				49,003
Subtotal			3,611,332				1,991,599
Reconciliation - Effect from restatement in constant currency			726,944				1,773,504
Total			4,338,276				3,765,103

			06.30.2022				06.30.2021
Depreciation and amortization
Cement, masonry cement and lime			1,000,979				529,681
Concrete			33,995				31,449
Railroad			263,140				137,320
Aggregates			15,225				13,119
Others			2,500				2,598
Subtotal			1,315,839				714,167
Reconciliation - Effect from restatement in constant currency			3,229,736				2,916,393
Total			4,545,575				3,630,560

Free translation in English of the original consolidated financial statements filed in Spanish with the Argentine National Securities Commission (“CNV”). In case of discrepancy, the consolidated financial statements filed with the CNV prevail over this free translation.

25

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LOMA NEGRA COMPAÑÍA INDUSTRIAL ARGENTINA SOCIEDAD ANÓNIMA

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2022 AND 2021

(All amounts are expressed in thousands of Argentine pesos - $ - except otherwise indicated)

			06.30.2022				06.30.2021
Sales revenue less cost of sales, selling, administrative expenses and other gains and losses
Cement, masonry cement and lime			12,408,117				8,609,480
Concrete			(39,088	)			(175,998	)
Railroad			(50,362	)			(41,970	)
Aggregates			85,683				13,025
Others			32,168				(2,511	)
Subtotal			12,436,518				8,402,026
Reconciliation - Effect from restatement in constant currency			(2,123,753	)			3,571,299
Total			10,312,765				11,973,325
Reconciling items:
Tax on bank accounts debits and credits			(479,797	)			(487,316	)
Financial results, net			(50,456	)			735,803
Income tax			(3,692,741	)			(9,625,289	)
Net profit for the year			6,089,771				2,596,523

 

In relation to the segregation of the results by geographic segment, the Group carries out 99.92% of its activities and operations in Argentina.

No customer has contributed 10% or more of the Group´s revenue for the six-month periods ended June 30, 2022 and 2021, respectively.

 

28.            COMMITMENTS

The Group’s commitments are described in Note 36 to the annual consolidated financial statements for the fiscal year ended December 31, 2021.

 

29.            FERROSUR ROCA S.A. CONCESSION AND RELATED RAIL SERVICES

On March 11, 1993, Ferrosur Roca S.A. obtained the concession of the General Roca National Cargo Railway Network with the exception of the Altamirano-Miramar corridor and the urban sections, through the approval of the concession contract formalized by National Executive Branch Decree No. 2681/92, after the presentation made through a national and international tender and formalized to that effect. The area of influence is concentrated in the center and south of the province of Buenos Aires, north of the province of Río Negro and Neuquén. It has access to the ports of Buenos Aires, Dock Sud, La Plata, Quequén, and Bahía Blanca.

Ferrosur Roca S.A. is indirectly controlled by the Company, through Cofesur S.A.U. which owns 80% of the interest, 16% of which belongs to the National State and the remaining 4% belongs to the workers of Ferrosur Roca S.A. through a trust created for this purpose.

The term of the concession is 30 years, which expires in March 2023, and originally provides for an extension of 10 additional years.

Ferrosur Roca S.A. has requested the above-mentioned extension in due time on March 8, 2018, and in line with the bidding terms and conditions and the concession agreement.

On November 7, 2018, Decree No. 1027/2018, which regulated Law No. 27,136, was published in the Official Gazette. The relevant subjects were: readjustment of existing concession contracts with the possibility of extending them for a term not greater than 10 years, full implementation of open access system on the day following expiration of the last concession contract (of the three private concessions existing at present), including extensions, with the possibility of initiating this modality in the branches that allow it when the planned investments are made; revision of technical standards; revision of the sanction regime, and creation of the registry of operators.

Free translation in English of the original consolidated financial statements filed in Spanish with the Argentine National Securities Commission (“CNV”). In case of discrepancy, the consolidated financial statements filed with the CNV prevail over this free translation.

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LOMA NEGRA COMPAÑÍA INDUSTRIAL ARGENTINA SOCIEDAD ANÓNIMA

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2022 AND 2021

(All amounts are expressed in thousands of Argentine pesos - $ - except otherwise indicated)

On March 29, 2021, through Resolution No. 219/2021, the National Commission for Transport Regulation (“CNRT”) approved the Rules and Regulations of the National Registry of Railway Operators and granted such capacity to Ferrosur Roca S.A. and the other railway concessionaires and, through Resolution No. 211 of the Ministry of Transport, published in the Official Gazette on June 28, 2021, rejected the request for an extension of the concession contracts duly submitted by all the private railway concessionaires.  Therefore, the railway concession operated by the Company will expire at the end of its original term, that is, on March 10, 2023. The purpose of the National State is that the national railway network be based on a mixed modality combining public and private cargo operators, where the National State will manage the infrastructure and control the related investments, thus allowing any registered railway operator to provide railway services regardless of who owns or possesses the facilities at the point of loading or destination.

As a consequence, the Group understands that, at the end of its concession, it will continue to provide the cargo transport rail services it currently provides but as a cargo operator under the terms set forth in Resolution No. 211, Law No. 27,132, and Decree No. 1027 dated November 7, 2018.  To this end, the Group will have to readjust various operational issues once it hands over control of the railway infrastructure linked to its current concession to the National State. The Group's Management understands that the intention of the National State is to prioritize the continuity of the current operators for each of the existing services and businesses, thus guaranteeing the best use of the experience they have acquired.

On June 9, 2022, the Ministry of Transportation published in the Official Gazette the Resolution 353/2022 in which it grants a 12-month extension in the concession granted to the concessionaire FerroExpreso Pampeano S.A. ending on June 30, 2023 and establishes the canon or toll to be paid by railway operators that circulate along the Bahía Blanca – Rosario branch.

As of the date of issuance of these consolidated financial statements, beyond the extension mentioned in the previous paragraph regarding one of the concessionaires, several regulations are still pending definition by the National State on which the railway operators scheme will operate as of March 2023, the date on which the current concession managed by Ferrosur Roca S.A. will end, together with the negotiations to implement the operator contracts with the different parties involved.

In this context, the Group has assessed the possible business scenarios, considering that its intention is to continue providing services as operator of the railway network. In these scenarios, the National State, responsible for managing the train traffic control systems and maintaining the railway infrastructure, would charge the Company a fee for the use of the railway infrastructure, which would replace direct maintenance expenses currently paid by the concessionaires plus the related tolls; no significant changes are expected in the rest of matter matters and activities compared to the current business model of Ferrosur Roca S.A. In addition, the Group´s assessment of the new business model has included estimation of the term for the provision of rail services, the routes and businesses that would be assigned, the future demand for rail freight services, and the allocation of fixed and variables costs in the new cost structure of Ferrosur Roca S.A., among other issues.

Finally, the Group has reassessed all accounting estimates associated with the end of the current concession, including delivery and control of the railway infrastructure and associated contracts in order to conclude the concession scheme as well as adjustment of its operating model to the new scheme as a rail operator.  No significant impact is expected to date. The Group will continue to monitor the new regulations as they come into effect, as well as the progress of ongoing negotiations with the National State and will record any related effect as soon as it is possible to make an estimate.

Free translation in English of the original consolidated financial statements filed in Spanish with the Argentine National Securities Commission (“CNV”). In case of discrepancy, the consolidated financial statements filed with the CNV prevail over this free translation.

27

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LOMA NEGRA COMPAÑÍA INDUSTRIAL ARGENTINA SOCIEDAD ANÓNIMA

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2022 AND 2021

(All amounts are expressed in thousands of Argentine pesos - $ - except otherwise indicated)

 

30.            THE ARGENTINE ECONOMIC CONTEXT

 

On November 14, 2021, the mid-term general legislative elections took place, and the outcome was contrary to the governing party, with a nationwide differential of almost nine points with respect to the main opposition alliance, and a loss of almost fifteen points as compared to the votes obtained in the 2019 presidential elections. After the electoral result became known, President Alberto Fernandez anticipated the sending and treatment at the National Congress of a bill articulating the multi-year economic program, including the agreement with the International Monetary Fund and a realistic budget that is plausible from a market perspective.

 

The central issues of the macroeconomic scenario in Argentina are as follows:

 

-

Due to the crisis unleashed by the COVID-19 pandemic, the Argentine economic activity was more affected than other economies in the region due to its previous macroeconomic weakness. The loosening of restrictions during 2021 and up to June 2022, due to the drop in infections, and the expansion of public spending, focused on expanding consumption, caused the economy to react by growing at a rate of approximately 10% in 2021, although still below the 2019 average activity levels.

 

-	The initial impact of the pandemic and social distancing measures on the economy and household income also affected poverty levels, with the poverty rate reaching 40.6% in 2021 and involving 18.8 million people nationwide.

 

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The primary fiscal deficit accelerated mainly due to the economic measures taken by the national government, which generated a monetary imbalance driven by money printing to increase the money supply as a way of financing the expansion of spending used for subsidies to mitigate the effects of COVID-19, social plans, and government employment, among other issues.

 

-	The national consumer price index published by INDEC accumulated 36.2% in 2022 and 50.94% for the year 2021.

 

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Reducing the fiscal deficit is one of the central issues in the framework of the negotiation with the International Monetary Fund (“IMF”), and a large part of the deficit is explained by the growth of subsidies due to the delay in rate/tariff increases. Also, as the subsidies are financed with monetary issue, this increases the pressures on inflation. Within the framework of an agreement with the IMF, the National Government hardly has room not to reduce energy subsidies.

 

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The low level of reserves in the Central Bank (“BCRA”) has led the national government to maintain a very restrictive exchange control for the purchase of foreign currency in the MULC, affecting the payment of imports of services and goods, financial indebtedness and dividends, among others. The imbalance due to monetary issue constitutes an inflation factor and, together with the restrictive exchange control imposed by the BCRA, favors the increase in the exchange rate gap.

 

31.       EFFECTS OF COVID-19 ON THE GROUP

 

On March 11, 2020, the World Health Organization declared the outbreak of coronavirus (COVID-19) as a pandemic. The public health emergency situation has spread practically throughout the world and different countries have taken various measures to tackle this.

As the pandemic took hold, the National Executive Branch issued a number of measures intended to restrict or suspend commercial operations, restrict travel, and set up social distancing measures. These restrictions have been loosening, or disappearing, during 2021 and 2022.

Free translation in English of the original consolidated financial statements filed in Spanish with the Argentine National Securities Commission (“CNV”). In case of discrepancy, the consolidated financial statements filed with the CNV prevail over this free translation.

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LOMA NEGRA COMPAÑÍA INDUSTRIAL ARGENTINA SOCIEDAD ANÓNIMA

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2022 AND 2021

(All amounts are expressed in thousands of Argentine pesos - $ - except otherwise indicated)

As a result, the Group adopted various measures to mitigate the effects of this situation, such as: (i) adapting the level of its operations based on market demand; (ii) implementing the use of remote work for administrative employees of the Group; and (iii) creating a crisis committee to monitor and evaluate the implementation of measures aimed at mitigating the effects of this pandemic.

The Group Management estimates that this situation will not generate a significant adverse impact on future operations, but the uncertainties regarding the effects, extent and duration of this situation do not allow a reasonable estimate of the potential impacts as of the date of issuance of these financial statements, which will depend on the significance of the health emergency and the success of the measures adopted and to be adopted in the future.

 

32.       OFFICIALLY STAMPED BOOKS

As of date of these interim financial statements, for administrative purposes, consolidated financial statements were not yet transcribed in the relevant certified books.

 

33.            SUBSEQUENT EVENTS

The Group has considered events after December 31, 2021, to assess whether it is necessary to recognize or disclose them in these consolidated financial statements. Such events were assessed through August 11, 2022, the date when the consolidated financial statements were available for issue.

33.1            New loan

On July 1, 2022, Loma Negra C.I.A.S.A. was granted new loan agreement with Eurobanco Bank Ltd. for USD 80 million, for a term of 90 days, extendable to 180 days, cancelable at maturity. This loan accrues interest at a variable nominal rate based on the SOFR rate to be paid quarterly.

Additionally, on July 7, 2022, the Company entered into a loan agreement with HSBC Bank Argentina S.A. for 3,000 million pesos maturing within 180 days, accruing a fixed interest rate of 52% per year.

33.2            Payment of dividends

On July 1,2022, the board of directors of the company approved the payments of dividends amount of 10,300 million to allocating a part of the Optional reserve for Future Dividends, equivalent to a dividend of Ps. 17.5947778152810 per share. The dividend was made available on July 12, 2022.

 

The board of directors also communicated that as a general principle the payment of such dividends will be made to all Shareholders in ARS. However, it will be granted to all Shareholders the option of (a) receiving payment of their proportion in the dividends through the delivery of the equivalent amount of USD resulting of the conversion of the proportional amount of the original dividend in ARS to USD through the Reference Exchange Rate of the Central Bank of the Republic Argentina – Communication “A” 3500 corresponding to the close of the immediate trading day prior to April 26, 2022 or (b) to receive payment in USD through Caja de Valores S.A., in each respective Shareholders’ local bank or in a bank account abroad

 

Free translation in English of the original consolidated financial statements filed in Spanish with the Argentine National Securities Commission (“CNV”). In case of discrepancy, the consolidated financial statements filed with the CNV prevail over this free translation.