Loma Negra Compañía Industrial Argentina (LOMA)

By both methods, the value today (DCF $9 · Multiples $7) is below the market price ($10).

Today — expensive, no margin of safety: at $10 trades ~41.5% above its value discounted to today (~$7); the expected return does not even reach the risk-free rate (4.5%).

At 5 years — Sobrevalorado: the expected total return is negative — the price already discounts a demanding scenario that, if not met, results in a loss.

The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$4.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($10) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The price discounts growth (4.4%/year) above our base case (2.0%/year) → it is priced for a demanding scenario and leaves little cushion against a slowdown.

That growth implies ~ARS 100.3 bn of owner earnings in year 5 (vs ~ARS 89.2 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). Cash accumulates the retained surplus —what is not returned as dividend or buyback—, so that EV falls and multiples compress going forward. The valuation is done on EV/EBIT. In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Model in billions of December 2025 pesos, the currency in which the 2025 annual report homogenizes its three fiscal years under IAS 29. Four decisions worth keeping in view. First: year-0 is the fiscal year closed December 31, 2025, not a twelve-month window built from quarters. Under inflation adjustment, each filing restates its series to the currency of its own closing date, so chaining quarters from different filings would mix units and produce a company that appears to be shrinking. The annual-reporter convention is used. Second: the operating result is not tagged in the XBRL — the corresponding concept was frozen at zero in fiscal 2021 — and the company does not present an operating subtotal in its income statement. It is composed by adding the lines presented above financial results: gross profit 185.007 minus selling and administrative expenses 94.345 plus other results 4.813 minus tax on bank debits and credits 9.033 equals 86.442 (fiscal 2024: 145.941; 2023: 181.857). The composition is verified against a measure the company publishes itself: 86.442 plus depreciation and amortization 85.528 plus tax on bank debits and credits 9.033 gives 181.003, and the second-quarter 2026 earnings release reports last-twelve-months adjusted result before interest, taxes, depreciation, and amortization as of December 31, 2025 at 211.494 pesos of June 2026, which divided by the 1.1685 restatement factor gives 181.00. It closes exact. Third: fiscal 2025 is a cycle trough and not the business's normal level, so the year-0 operating result is normalized to mid-cycle. The operating margin was 15.0% in 2023, 15.9% in 2024, and 10.2% in 2025; the midpoint of the range is taken, 13.0%, never the top. Applied to actual revenue of 848.087, that gives a normalized operating result of 110.3 against the 86.4 reported. The same criterion governs the operating cash flow margin: it was 21.6%, 20.1%, and 17.8% in the three prior fiscal years and collapsed to 7.7% in 2025 on tax payments and working capital; it is normalized at 16.5%. The year-0 revenue level is the reported one, untouched. Fourth: capex is treated entirely as maintenance. The company operates at around 41% of its installed cement capacity (4.9 million tons produced against 12.0 of capacity), so the volume recovery the model projects does not require expansion investment: under the Greenwald criterion, growth capex is proportional to the change in sales measured against a capacity base that is already built, and here that base is in surplus. Capex is set at 8.5% of revenue, above the 7.4% of 2025 and below the 10.4% of 2024, and depreciation is held at its 85.5 level because in constant pesos the fixed-asset base stays approximately flat. The market-value anchor is computed with the Central Bank reference exchange rate (Communication A 3500) as of June 30, 2026, 1,483.02 pesos per dollar, published in the second-quarter earnings release; it is the most recent citable rate from a filed document. The verdict is resolved by the engine using the live exchange rate. A currency caveat worth reading before any return figure: the model is in December 2025 pesos and the share price is today's. Between one date and the other, Argentine inflation ran that the model's unit does not incorporate and the exchange rate does. The December 2025-to-June 2026 restatement factor is 1.1685, derived from two published figures for the same date — total equity as of December 31, 2025 stands at 1,245.767 in the earnings release and at 1,066.162 in the annual report — and independently corroborated by the adjusted-result identity described above. The consequence is that the per-certificate value expressed in dollars is understated by at least that 17%, and more if the period after June is considered, which cannot be quantified without a published figure. It is not adjusted for, because doing so would require an index no filed document provides, but it is declared with its known magnitude: the return the card reports is a floor, not a midpoint. The second-quarter 2026 earnings release anchors the start of the path. The first half produced revenue of 471.589 against 464.042, i.e. 1.6% real growth, with cement, masonry cement, and lime volumes up just 0.2% and a 1.4% decline in the quarter. The chief executive states that industry volumes have not yet recovered the expected momentum and that a stronger level of activity is expected in the second half. That is why year one starts at 2.5% real rather than a rebound: the already-reported half does not support one. The shape of the path is trough-and-gradual-recovery, not monotonic deceleration, and is declared as such: the acceleration in years two and three reflects the normalization of the construction cycle from an exceptionally low capacity utilization, converging from there toward 4% durable real growth. By year five, revenue reaches 1,066.6, still 12% below the real 2023 level, and the implied volume of around 6.2 million tons leaves utilization around 51%: the projected recovery does not exhaust installed capacity. The segment mix is not broken out into separate pieces, and the reason is in the data. The second-quarter 2026 earnings release breakdown, without the IAS 29 effect, shows that cement, masonry cement, and lime contribute 87.1% of revenue and 99.5% of the adjusted result in the first half of 2026; concrete, rail, and aggregates destroy results — minus 671, minus 1,369, and minus 725 million respectively — and other contributes 3,334. Assigning a negative-result segment its own multiple would produce a negative value with no economic meaning, so the valuation runs on the consolidated business with the archetype multiple, and the rail segment's different nature is declared as a risk, not as a piece. The segment breakdown in the annual report that the extraction brought in does not reconcile against consolidated revenue — it sums to 744.3 against 848.1, a 12.2% gap — because it presents segments before inter-segment eliminations and without the other-revenue line the earnings release does disaggregate. It is not used: consolidated revenue of 848.087 is tagged in the XBRL and is the only level feeding the model. No dividend or buyback is modeled. The company has not distributed since 2023 and bought back no shares or certificates during fiscal 2025; the April 23, 2026 shareholders' meeting allocated 23,585 million to the optional reserve for future dividends, which is an accounting allocation, not a declared distribution. The surplus accumulates, which is what the company has been doing through debt repayment: the ratio of net financial debt to last-twelve-months adjusted result fell from 1.47 times at year-end 2025 to 1.30 times as of June 30, 2026.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (EV falls as cash increases). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $9 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $10, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $9 in 5 years and a required return of 4.5% annually, the maximum to pay today is $7. Against the current market price ($10), the margin of safety is -41.5% (trades above the maximum → a premium is paid) and the total return at that price would be -2.5% annually.

• Cycle normalization. The year-0 operating margin is taken to the midpoint of the range across the three homogenized fiscal years — 13.0%, between the 10.2% of 2025 and the 15.9% of 2024 — not to the top, and the exit multiple is taken from inside the archetype band, not above it. These are the two guardrails against stacking optimism in a cyclical.
• Consistency between the multiple and terminal growth. A 4% durable real growth rate by year five against a ten-times multiple implies a 10% operating-result yield, consistent with a cyclical, price-taking business that does not compound through reinvestment.
• Currency mismatch in reading the return. The model is in December 2025 pesos and the certificate's price is today's: the inflation accrued between the two dates is not in the numerator but is in the exchange rate. The reported return understates the real one by at least the 17% the June 2026 restatement factor verifies.

• ✕ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (120%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Strong and predictable cash generation. Operating cash flow fell from 243.6 billion in 2023 to 164.1 in 2024 and 65.4 in 2025, the latter further hit by concentrated tax payments of 58.3 billion in the first half (December 2025 pesos). Cash follows the construction cycle, which does not depend on the company.
• Return on capital against the 10% bar. Return on invested capital of 5.0% — already calculated on the mid-cycle normalized operating result, not on the 2025 reported figure — sits well below the bar. Two distinct factors weigh on it: the cycle trough, which the normalization already partly corrects, and invested capital restated to closing currency by the inflation adjustment in the denominator.
• Reinvestment runway. There is no expansion runway, and right now that is an advantage: it operates at around 41% of its installed capacity, so the coming growth is absorbed with assets already paid for and flows to earnings instead of consuming them. What it limits is long-term compounding through reinvestment.
• Quality of reported earnings. Net income is not a useful guide here: the result from monetary position and exchange differences moved it between 202 billion in 2024 and 23 billion in 2025 without operations changing in that proportion. That is why the valuation runs on an operating result composed from the presented lines.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

The engine of the business is the dispatched volume of cement, masonry cement, and lime, which accounted for 87.1% of revenue and 99.5% of the adjusted result in the first half of 2026. Sales volume fell from 6.42 million tons in 2023 to 4.90 in 2024 and recovered slightly to 5.02 in 2025 (production, published only for 2024 and 2025, was 4.8 and 4.9), against installed capacity of 12.0 million: that is both today's margin problem and the lever behind the thesis, because fixed cost is currently spread over far less volume than the plant can produce. The second indicator tracks the ability to withstand the trough without compromising the balance sheet: the ratio of net financial debt to last-twelve-months adjusted result rose to 1.47 times at year-end 2025 and returned to 1.30 as of June 30, 2026.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (31-dic-2025): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Quality of the path's starting point. Year one is anchored on the already-reported first half of 2026 — 1.6% real growth with volumes up 0.2% — and not on the historical trajectory, which describes a demand collapse rather than an extrapolable trend.
• Composition of growth. In the most recent reported quarter, cement growth was entirely price-driven, with volume down 1.4%, while concrete and aggregates fell double digits. Price-driven growth in a market with excess capacity and unit cost rising faster than price cannot be extrapolated.
• Reality check on the terminal level. By year five, revenue is 12% below the real 2023 level and the implied volume leaves capacity utilization around 51%. The path does not assume recovering the peak or exhausting the plant.

• Product relevance and predictability. Cement will still be used in ten years and has no scale substitute for structural construction. What is not predictable is volume: it depends on the Argentine construction cycle; the company's own sales volume fell 23.7% in a single year when public-works financing was cut.
• Competitive position and market share. 43.6% of the market by volume in 2025 and the only cement producer with output across several regions of the country. Transport cost relative to product value confines Holcim, Avellaneda, and Petroquímica Comodoro Rivadavia to the markets neighboring their own plants.
• Pricing power. Limited, and verified against: in the second quarter of 2026 unit cement cost rose 5.4% against a 3.6% higher average price, meaning price ran behind cost. With excess installed capacity across the industry, raising price above cost costs volume.
• Operating leverage. Very high, and currently working against the company: with the plant at 41% utilization, fixed cost is spread over little volume and the operating margin fell from 15.9% to 10.2% in a year. The same lever works upward if volume returns, without requiring investment.
• Sector capital cycle. Capital has already gone in and is in surplus: Avellaneda completed the El Gigante expansion in late 2020 and Holcim expanded Malagueño (no date published), and the industry was left with idle capacity right as demand collapsed. There is no sign of capital leaving, so the volume recovery will be shared among all producers.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• !Leverage (net debt / EBITDA)Net debt / EBITDA 1.4x
• ✕Interest coverage (EBIT / interest)1.9x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 120% of ROIC
• ✕Value creation (ROIC − 10% bar)-5pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 0.8x — no over-investment
• –Float / working capitalNeutral WC
• –Dilution (SBC % of revenue + shares)no data

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Leverage. Net financial debt at 1.30 times the last twelve months' adjusted result as of June 30, 2026, against 1.47 at year-end 2025. It is a comfortable level, and measured at the lowest point of the earnings cycle.
• Maturity profile. 85% of debt ended up in the long-term bucket after first-half 2026 refinancing, with an average maturity of 1.4 years and no maturities left for the rest of the year, after canceling a ten-million-dollar note in May.
• Currency mismatch. As of June 30, 2026, 87% of debt was denominated in dollars against revenue that is entirely in pesos. It is the dominant balance-sheet risk: in 2025, exchange differences produced an 85 billion loss.

How cash comes in and how it is deployed. In green, the business's own cash (the owner-FCF it generates and reinvests); in gray, the float and credit — customer and funding money, which is not the shareholder's.

The split corresponds to fiscal 2025 and is nearly unanimously toward reinvestment in operations: no dividends, no share or certificate buybacks, and no acquisitions. It is further distorted by an exceptionally low operating cash flow — 65.4 billion against 164.1 in 2024 — from concentrated tax payments: capex of 62.9 billion took up nearly all of it, and the 2.5 billion residual went to lengthening the debt maturity profile. What the allocation shows clearly is the trough-period policy: zero dividends since 2023, zero shares or certificates acquired during fiscal 2025, capex cut from the 96.1 billion of 2024, and the surplus directed to lengthening the debt profile. The April 23, 2026 shareholders' meeting allocated 23,585 million to the optional reserve for future dividends, which is an accounting reserve constitution, not a declared distribution.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Capital allocation through the trough. Cut capex from 96.1 to 62.9 billion, suspended dividend distributions since 2023, bought back no shares or certificates during fiscal 2025, and used cash to lengthen the debt maturity profile to 85% in the long-term bucket. That is the policy appropriate for a cycle trough.
• Candor in communication. The second-quarter 2026 earnings release explicitly states that industry volumes did not recover the expected momentum and details the compression of the unit margin from cost, rather than highlighting only nominal growth. It also publishes the segment mix showing the three segments that destroy results.
• Alignment and ownership structure. There is a controlling shareholder, but indirect ownership ended up split among three creditors who received it in payment within a court-supervised reorganization, with no agreement among themselves, and with a sale process open through September 2028. It is the opposite of a family or founder committed for the long term.

• Missing buyers from reading complexity: it trades in New York but operates entirely in Argentina and files under an inflation-adjustment regime in which each filing restates the series to the currency of its own closing date, so two consecutive filings cannot be compared directly.
• A named motivated seller: the indirect parent went through a court-supervised reorganization in Brazil, opened in December 2024 and approved in December 2025, that capitalized claims and left indirect ownership split among three creditors with 38.7%, 26.7%, and 24.0%, with no shareholder agreement among them. The plan expressly enables a process to sell the stake in Loma Negra through September 30, 2028.
• Cycle trough extrapolated: the 2025 operating result came in 41% below 2024 and 52% below 2023 after the withdrawal of public-works financing, which took 23.7% off the company's own sales volume in 2024.
• The operating economics did not collapse at the same pace as the operating result: the pre-depreciation adjusted margin fell from 25.9% in 2024 to 21.3% in 2025, but stayed flat in the first half of 2026 against the same period a year earlier — 22.6% versus 22.6% — with net financial debt falling from 1.47 to 1.30 times. A cycle trough with unit margins that stopped deteriorating is the classic setup for a multiple the market projects forward as if it were permanent.

The appropriate caveat is declared: with a stake-sale process pending through September 2028, part of the price may be pricing in expectations of a corporate transaction and not the value of the going-concern business. This card's valuation is standalone and assumes no sale proceeds and no control premium.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -13%/year (-50% total): the margin of safety protects the downside. The bull (+5%/year, +29% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Construction volume does not recover. It is the central disconfirmer of the thesis and the one that decides the verdict tier: without a recovery in utilization, the margin stays at the 10% of 2025 and there is nowhere for the return to come from.
• Argentine macroeconomy. Inflation at 31.5% year over year in 2025, exchange controls under partial easing, restrictions on remitting profits, and a liability side 87% dollarized against revenue in pesos.
• Control-stake sale process. Open through September 30, 2028, with a right of first offer in favor of a named third party and indirect ownership split among three creditors with no agreement among themselves. It affects the verdict in both directions and the minority shareholder does not control it.
• Railroad concession. Expires on September 10, 2026, and can be revoked earlier without compensation; the government has already removed sections and is moving toward an open-access scheme. It puts part of the freight-cost advantage at risk, not the business.
• Industry excess capacity. Rivals can fight for volume without investing because they have already expanded their capacity, and a change in import regulations would enable imported cement or clinker. It caps price during the recovery.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  Fails the quality gate: ROIC 5% does not clear the 10% bar.

• Peter Lynch Growth at a reasonable price (GARP)

  A cyclical growing 2% at a PEG of 9.3 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 5% (EBIT/EV) + ROIC 5% → falls outside the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts 4% vs our 2%: priced for perfection, no favorable mispricing.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -13%/yr over 5y (material loss) → risk of permanent capital loss.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: intangibles, cost advantage, efficient scale, switching costs → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  The price implies 4% vs our 2%: coherent, but at the optimistic end of the range.