Critics charge that building all 12 terminals would produce an excess capacity. But even half that number would produce three-quarters of the carbon emissions Germany is allowed under international agreements, according to a recent report published by a German environmental watchdog. The terminals would be in use until 2043, far too long for Germany to become carbon neutral by 2045, as pledged by Mr. Scholz’s government.

And countries are not just investing in infrastructure at home.

Last month, Mr. Scholz was in Senegal, one of the developing countries invited to the Group of 7 summit, to discuss cooperating not just on renewables but also on gas extraction and L.N.G. production.

In promoting the Senegal gas project, analysts say, Berlin is violating its own Group of 7 commitment not to offer public financing guarantees for fossil fuel projects abroad.

These contradictions have not gone unnoticed by poorer nations, which are wondering how Group of 7 countries can push for commitments to climate targets while also investing in gas production and distribution.

One explanation is a level of lobbying among fossil fuel companies not seen for years, activists say.

“It looks to me like an attempt by the oil and gas industry to end-run the Paris Agreement,” said Bill Hare of Climate Analytics, an advisory group in Berlin, referring to the landmark 2015 international treaty on climate change. “And I’m very worried they might succeed.”

Ms. Morgan in the German Foreign Ministry shares some of these concerns. “They’re doing everything that they can to move it forward, also in Africa,” she said of the industry. “They want to lock it in. Not just gas, but oil and gas and coal.”

But she and others are still hopeful that the Group of 7 can become a platform for tying climate goals to energy security.

Environmental and foreign policy analysts argue that the Group of 7 could support investments in renewable energy and energy efficiency, while pledging funds for poorer nations hit with the brunt of climate disasters.

Above all, activists warn, rich countries need to resist the temptation to react to the short-term energy shortages by once again betting on fossil fuel infrastructure.

“All the arguments are on the table now,” said Ms. Neubauer, the Fridays for Future activist. “We know exactly what fossil fuels do to the climate. We also know very well that Putin is not the only autocrat in the world. We know that no democracy can be truly free and secure as long as it depends on fossil fuel imports.”

Katrin Bennhold Bennhold reported from Berlin, and Jim Tankersley from Telfs, Austria. Erika Solomon and Christopher F. Schuetze contributed reporting from Berlin.

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Lumin and Leap to Help Homeowners to be Automatically Paid to Reduce Energy Use

CHARLOTTESVILLE, Va.–(BUSINESS WIRE)–As energy prices soar and households seek to lower costs and maximize the value of their solar and storage systems, Lumin is partnering with energy market access provider Leap to offer Lumin Response, a program providing homeowners automated participation in the wholesale demand response (DR) market, with financial incentives for energy reduction during times when the local grid is stressed. Launching for select customers in California in July, Lumin Response is the integration of Lumin’s home energy management platform and smart circuit control technology with Leap’s distributed energy resource aggregation platform, reducing a home’s power usage by automatically turning off appliances when electricity prices are highest. Participants will then help balance the electrical grid and receive compensation for their energy reduction.

“Smart energy devices can make an important contribution to grid stability during periods of peak demand,” said Jason Michaels, Chief Commercial Officer at Leap, “Together, Leap and Lumin are making it possible for homeowners to unlock more value from their energy assets and become active participants in creating a more resilient, sustainable energy system.”

Users of Lumin Response will receive an in-app message or email notifying them they are eligible for financial incentives. Once they provide a simple set of preferences for when and how long their appliances can be turned off, participation is seamless and Lumin will automate the entire process.

Lumin’s technology connects the most energy-consuming circuits and various smart devices, including smart thermostats, connected appliances such as refrigerators, smart controllable plugs, and electric vehicle chargers. By interconnecting these devices on its platform, Lumin creates an ecosystem where energy consumption is synchronized and remotely accessible, and controllable, with the energy supply available to a household.

“This partnership presents the first true example of automated value stacking for individual homes in the demand response space, beyond battery participation in virtual power plants,” explained Alex Bazhinov, Founder and CEO of Lumin. “We are thrilled to work with Leap to help modernize residential power loads and provide more flexibility and options for homeowners. Designed to work well for individuals who may or may not have an energy storage system in place, we deliver value from multiple streams.”

Demand response (DR) is a short-term, voluntary decrease in electrical consumption that is usually triggered by compromised grid reliability or high wholesale market prices. While many U.S. utilities offer their customers some DR options, the Lumin-Leap partnership provides a unique, automated DR solution for any appliance connected to a Lumin Energy Platform. In addition, participants can receive direct, performance-based payments for their DR participation rather than an annual credit through their utility or a points system.

“As many municipalities move to enact standards for energy-saving measures in homes, smart appliances that integrate seamlessly with renewable energy systems will become more important as we continue to see energy strain on the grid, and this is why Lumin’s user-friendly, automated system is so valuable,” added Keegan Campanelli, Product Manager at Lumin. “And thanks to our partnership with Leap for wholesale demand response, we can now help homeowners save money at the same time. Lumin Response is a big win for everyone.”

Leap’s software platform makes it easy for smart energy technologies to generate revenue by providing flexibility and support to the grid. The company has dispatched over 10,000 MWh of clean energy to electric grids, reducing over 1,000 metric tons of CO2 and offsetting the equivalent of 3,500 hours from gas-powered peaker plants. Combined with the UL-certified Lumin® Energy Management Platform, users can maximize their energy and the return on investment for their residential solar systems.

About Lumin

Lumin® is the pioneer and market leader for responsive load management, adding exceptional value to residential microgrids by balancing home energy supply and demand. Lumin helps homeowners automatically or manually control their personal microgrid and enhance and protect their investment in solar PV and energy storage. Learn more at luminsmart.com.

About Leap

Leap is the leading global platform for integrating flexible energy resources into global electricity markets. Leap supplies the grid with zero carbon, price-competitive alternatives to fossil-fueled power plants by creating virtual power plants (VPPs) from its partners’ batteries, electric vehicles, smart thermostats, HVAC systems, and industrial facilities. Leap performs all the heavy lifting to operate and stay compliant across wholesale energy markets, enabling partners to unlock hidden revenue, increase customer engagement, and achieve sustainability goals.

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A Farmer Holds On, a Fraying Lifeline for a Besieged Corner of Ukraine

SIVERSK DISTRICT, Ukraine — One of the few civilians still driving on a road leading toward the battle front, Oleksandr Chaplik skidded to a stop and leaned out the car window to swap information with a villager.

He was taking supplies back to his village, one of a handful still in Ukrainian hands that lie in the path of the Russian advance.

“We are surrounded on all sides,” said Mr. Chaplik, 55, a dairy and livestock farmer. “It is the second month without light, without water, without gas, without communication, without the internet, without news. Basically, horror.”

“But people need to eat,” he said. “I am a businessman. So I am doing my job.”

Mr. Chaplik owns about 75 acres of land near the city of Sievierodonetsk, where Russian and Ukrainian troops have been battling for control in heavy street fighting in recent days. The countryside around his farm is under almost constant bombardment by Russian forces trying to encircle the easternmost Ukrainian forces and lay siege to Sievierodonetsk and Lysychansk.

street fighting raged in the contested city of Sievierodonetsk. Jens Stoltenberg, NATO’s secretary general, warned that the conflict appeared to have become a “war of attrition” and advised allies to be prepared for “the long haul.”

“My nerves are cracking,” he said, as he declined another phone call. “I am working 14 to 15 hours a day. Physically I am tired.”

So now he is arranging for his son to bring in a mobile antenna, so the villagers can be in touch with their relatives.

He sees more problems on the horizon. The war has disrupted farming and food production to such an extent that people in eastern Ukraine could go hungry in coming months, he warned.

The potatoes are already planted, which will provide food for the villagers, he said, but meat and milk will become scarce.

“If I do not prepare feed for my cows they will die this winter,” he said. “I cannot cut the hay because of the cluster bombs in the fields and I need 12,000 bales of hay and I do not have the workers.”

And as he follows the progress of the war, and the steady advance of Russian troops, he said it was likely that they would seize control of the village and he would lose the farm that he built up over more than 20 years.

Separatist forces backed by Russia seized the area in 2014 but were pushed back after a few months. But this time he said he did not expect President Vladimir V. Putin to stop. The Russian leader wants to seize a swath of the country from the city of Kharkiv in the northeast to Odessa in the southwest, he said.

“He will not calm down,” he said. “He will fight for a year, two, three, until he reaches his goal.”

Mr. Chaplik has been slaughtering his pigs, so only one remains, slumbering in his pen. The newborn calves will have to be slaughtered too, he said. “It’s a shame.”

If the Russians came, he added, he would have to leave his guard dogs, six German shepherds. “I could not bear to put them down,” he said. “I will let them loose.”

If the shells came too close, he would take his workers and leave, he said. “I will start anew,” he said. “Give me a little piece of land, in Ukraine, in the United States, wherever. I can build a great business again.”

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Hit Hard by High Energy Costs, Hawaii Looks to the Sun

Recognizing that reality, state officials in recent years have gone back to encouraging the use of small-scale energy systems. To manage the supply and demand of electricity, for example, Hawaii offers up to $4,250 to homeowners on Oahu, home to about 70 percent of the state’s population and Honolulu, to install home batteries with their solar systems, defraying as much as third of the cost of doing so. Utilities can tap those batteries for power between 6 and 8:30 p.m., when energy demand typically peaks.

“It’s a good example of a good policy pivot with utilities and regulators saying, ‘We need to change how we approach this,’” said Bryan White, a senior analyst at Wood Mackenzie, a research and consulting firm.

Unlike most of the country, Hawaii burns a lot of oil to generate electricity — a common approach on islands because the fuel is easier and cheaper to ship than natural gas.

“We’re unique in that we’re dependent on oil for more power generation than the rest of the U.S. mainland combined,” Marco Mangelsdorf, a lecturer at the University of California, Santa Cruz, who specializes in the politics of energy and has lived in Hawaii for much of his life.

Power plants fueled by oil supplied nearly two-thirds of Hawaii’s electricity last year, down from nearly three-quarters a decade earlier, according to the Energy Information Administration, a federal agency. Rooftop solar, by comparison, supplied about 14 percent, up from 6 percent in 2014, the earliest year for which the agency has that data.

The state had imported about 80 percent of its oil from Russia, Libya and Argentina, which offer a grade that Hawaii’s refinery can process. The remaining 20 percent came from Alaska.

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Ukraine Live Updates: Russia Hustles to Recruit Soldiers and Halts Gas Supplies to Finland

The Samara Metallurgical Plant, a sprawling complex in southwestern Russia that spans an area the size of a dozen city blocks, is a cornerstone of Russian industry. It is the country’s largest supplier of aluminum commercial and industrial products.

It is also a source of critical parts for the Russian warplanes and missiles that are now tearing through Ukraine. And atop its edifice, spelled out in giant blue letters, is the name of its American owner: Arconic, a Pittsburgh-based, Fortune 500 company that is one of America’s largest metalworking firms even after splitting out from the industrial giant Alcoa in 2016.

Arconic does not make weapons. But its sophisticated forges are among a handful of machines in Russia that can form lightweight metals into large aerospace parts like bulkheads and wing mounts.

Under an agreement with the Russian government, the company has from the start of its operations at Samara, in 2004, been legally required to supply the country’s defense industry as a condition of operating a plant whose mostly nonmilitary output has proved tremendously lucrative.

Even as Russia turned its military toward ever more aggressive ends around the world and the relationship between the United States and the Kremlin soured, Arconic maintained the Samara operation, despite the growing legal and political complications of operating there.

Now, however, with Russia’s invasion of Ukraine polarizing the world, Arconic’s leadership has found that its business at Samara is, finally, unsustainable.

Though there is no indication that Arconic is in breach of American or other Western sanctions, those penalties have made it difficult to keep the plant supplied and operating. But shutting down production could expose its employees there to jail time under Russian laws on maintaining strategic production. And Russia has already cut off Arconic’s access to profits from the Samara plant.

“The conflict in Ukraine has made our continued presence in Russia untenable, which led to our decision to pursue a sale,” Timothy Myers, Arconic’s chief executive, said in a written statement on Friday.

Company documents acquired by The New York Times, along with financial filings and other public materials, reveal Arconic’s struggles to keep the plant running. The documents were provided by a whistleblower employee who objected to Arconic’s continued involvement in Russia even after the invasion of Ukraine.

On Wednesday, the day after The Times approached Arconic with details of its work in Russia, its board approved a plan that, according to internal documents, had been under internal consideration for weeks: to sell the plant outright. The company announced this decision on Thursday.

But any sale remains hypothetical, as the company does not yet have a buyer. And finding one would require regulatory approval at the highest levels from both the United States and Russia.

That is perhaps fitting, as those governments had cooperated to pave the way for Arconic’s ownership of Samara in the first place.

Now, the long-coming divorce, accelerated by the war in Ukraine, is proving costly, with European energy consumers and companies like Arconic caught between now-hostile powers.

Credit…Daniel Berehulak for The New York Times

The Arrangement

“The era in which the United States and Russia saw each other as an enemy or strategic threat has ended,” Presidents George W. Bush and Vladimir V. Putin announced at a 2002 summit meeting in Moscow. Now, they said, “We are partners,” praising each other as like-minded allies in the war on terrorism.

Mr. Bush encouraged American companies to buy up Russian industries that had fallen into disrepair. Economic integration, it was widely thought, would bind Russia and the West for good.

Credit… Konstantin Zavrazhin/Getty Images

American corporations snapped up whole factory compounds, once the engines of Soviet power. Moscow welcomed this, believing American financing and know-how might reconstitute Russian industrial might.

The American industrial giant Alcoa joined the gold rush in 2004, buying two complexes in Russia, including the one at Samara. It purchased both factories for $257 million but spent twice that rebuilding Samara, which it found running at one-third capacity.

Within the facility was a nine-story metal behemoth: a huge forge press that had been built right into the foundation, able to form the parts that make up the largest airplanes and missiles. It is one of only a handful like it in the world, including just two in Russia.

“These machines are essential to the defense industry,” Martino Barbon, a representative of the manufacturing firm Gasparini Industries, said, calling them “the backbone” of production.

In an interview, Mr. Myers said that Samara’s giant press had seen little use in recent years. Still, its presence, along with a number of smaller forges, underscores that Samara, like many Soviet-era facilities, had been designed to combine commercial and military work.

When it bought the Samara plant, Alcoa — which split part of its operations, including those in Russia, into the name Arconic in 2016 — did not explicitly seek to become a Russian military supplier. Rather, this was Moscow’s condition for the sale.

That condition remains in force, according to company documents that describe a legal obligation to “manufacture aerospace and defense products” for sale to Russia’s weapons industry.

Mr. Myers — who is now the chief executive and had been among the first employees to visit Samara in the early 2000s — said that the U.S. government knew about Moscow’s terms when it approved Alcoa’s purchase. The company’s Russian subsidiary sells most products through other distributors and therefore Arconic cannot control how those products are used, he said.

But company documents show that Arconic has known throughout that the Samara operation was supplying Russia’s military, even if it was only a small part of the company’s overall business.

Moscow required the company to sign an agreement, as a condition of purchase, that it would pledge to indefinitely supply programs that it deemed essential. Mr. Myers acknowledged these terms in an interview with a Russian news outlet just last year.

“The main condition of the deal,” Mr. Myers said, “was the obligation to ensure uninterrupted supplies” for “state defense and aerospace programs.”

The agreement included a supplemental document, a copy of which The Times acquired, detailing mandatory production contracts.

The file lists more than a half-dozen of Russia’s largest weapons-makers, such as N.P.O. Novator and Komsomolsk-on-Amur Aviation Plant. Altogether, the companies provide the bulk of Russia’s cruise missiles, ICBMs, attack helicopters, strategic bombers and other hardware.

Credit…Dmitry Astakhov/Sputnik/Via Agence France-Presse — Getty Images

The file applied to both plants, the second of which Alcoa later sold. But it underscores Russia’s insistence on steady military supplies — and the American company’s willingness to comply.

For Moscow, the greatest benefit may have been modernization: Western financing and know-how brought the plant from derelict to state-of-the-art.

For Alcoa/Arconic, this was the cost of admission to Russia. In financial terms, it paid off handsomely.

Last year alone, Samara brought in nearly $1 billion, accounting for 16 percent of Arconic’s third-party sales worldwide, according to financial filings.

The Breakdown

Before long, a string of Russian military interventions, chiefly its annexation of Crimea in 2014 and its entry to the Syrian war the next year, transformed Western views of Russia.

Arconic found itself supplying, however indirectly, a Russian military that was now seen as a global threat.

Still, the company remained in Russia.

Moscow was no longer so welcoming. It codified sweeping “antimonopoly” laws allowing it to restrict or expel foreign companies involved in sensitive industries.

American companies became especially likely to face official investigation. This often came with supposedly temporary injunctions that make doing business difficult.

Richard Aboulafia, an aerospace industry consultant, said that Russia has since effectively seized control of many foreign-owned plants through what he termed “oligarchization.”

Rather than outright nationalize those businesses, Moscow coerces them into selling themselves off to Kremlin-linked firms, sometimes for pennies on the dollar. Just this week, the French automaker Renault sold a factory in the country to a Russian government-linked firm for one ruble.

Credit…Sergey Ponomarev for The New York Times

In 2020, Arconic was hit with one such investigation. Russian officials barred Arconic from disbursing its profits from Samara or even restaffing leadership at the Russian subsidiary that runs the plant.

Richard Connolly, a University of Birmingham economist who advises companies on doing business in Russia, called it “very surprising” that Arconic, unlike many other American companies, had not yet been forced out of Russia.

From the Kremlin’s point of view, coercing Samara’s owners to sell the plant, as it has with several other American-owned business over the years, does carry some risk. It could disrupt production at a time when Russia already faces battlefield setbacks. But tolerating Arconic would mean leaving critical infrastructure in the hands of an American corporation.

Dr. Connolly suggested that Russian leaders may still see American knowledge and technology as too critical to lose at Samara, especially as battlefield losses wipe out advanced weapons that, because of sanctions, Russia may struggle to replace.

“They realize they might not be able to produce everything themselves,” he said.

The Unwinding

Russia’s invasion of Ukraine, in February, forced difficult conversations within Arconic, according to internal documents and the account of a whistleblower employee who asked not to be named because the employee did not have the company’s permission to speak.

At the end of 2021, amid Mr. Putin’s buildup to war with Ukraine, Samara’s forging division had its best quarter on record, reporting an 82 percent increase in production from the prior year. An internal presentation touting the rise listed it under the heading “Aerospace.”

That constituted roughly one percent of the plant’s overall output, making it something of a financial afterthought compared with the rest of the company’s business.

Still, with Russian warplanes and missiles employed in shocking attacks in Ukraine considered to constitute possible war crimes, ethical considerations weighed heavily, according to the employee.

By March, even as sales poured in, Arconic’s leadership was exploring ways to leave Russia entirely, according to internal memos.

But any purchase would require the approval of the Russian government, as well as VSMPO-Avisma, the Kremlin-linked firm with which Arconic had formed a joint partnership.

Selling would also require a license from the Treasury Department to avoid violating sanctions.

Even as Arconic sought an exit, internal documents show that the company went to some lengths to keep Samara running.

Credit…Tyler Hicks/The New York Times

As early as March, with shipping companies ceasing operations in Russia, the company began seeking new ways to supply the plant with production materials.

A few weeks later, the company concluded that, because of new sanctions, U.S.- and Europe-based employees could no longer work on efforts to supply the plant with materials, even from abroad.

The company shifted this work to its division in China, where employees were thought to be unconstrained by Western sanctions.

By early May, an internal presentation reported, Samara was hitting “numerous production volume records.” And sales were up: $233 million in the first quarter of 2022, from $195 million the year before. This likely reflected the commercial work that makes up most of Samara’s output, rather than military projects, but it underscored Arconic’s success in keeping the plant spinning at full speed.

Still, the company concluded around the same time, according to Mr. Myers, its chief executive, that the war would continue for a long stretch, and with it both the sanctions and Russian government restrictions constraining Arconic’s ability to operate. Mr. Myers said that moral considerations also factored into Arconic’s decision to seek to leave Russia.

That the partnership between Arconic and Russia ever seemed workable underscores how far the world has moved on from the notion that first brought them together: that economic integration would end a century of Russian-Western enmity and finally secure lasting peace.

Mr. Connolly, the economist, compared Arconic’s stake in Russia to Europe’s decision to build its energy grids atop Russian gas pipelines and oil shipments, which was thought to make conflict unthinkable.

Instead, European energy consumers are effectively funding Russia’s government even as they punish it with sanctions, much as Arconic appears caught up in Russian militarism that Washington had once hoped American investment might temper.

“It’s a really graphic illustration,” Dr. Connolly said, “of the dashed hopes of that era.”

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Baby formula makers ramp up U.S. supplies to tackle shortage

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  • Reckitt boosts baby formula production by 30%
  • Nestle flies supplies to U.S. from Europe
  • Abbott gets go-ahead to resume production
  • U.S. to allow imports from foreign makers

LONDON, May 17 (Reuters) – Top baby formula makers Reckitt Benckiser (RKT.L) and Nestle have ramped up supplies to the United States to resolve a shortage that has emptied shelves and caused panic among parents.

Baby formula aisles at U.S. supermarkets have been decimated since top U.S. manufacturer Abbott Laboratories (ABT.N) in February recalled formulas after complaints of bacterial infections.

Abbott said on Monday it had reached an agreement with the U.S. health regulator to resume production of baby formula at its Michigan plant, marking a major step towards resolving the nationwide shortage. read more

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In the meantime, other baby formula makers have stepped up production and shipped extra supplies to the United States.

Reckitt Benckiser is boosting baby formula production by about 30% and making more frequent deliveries to U.S. stores, an executive told Reuters on Tuesday. read more

The company, which makes its U.S. formula in three facilities in Michigan, Indiana and Minnesota, has granted plants “unlimited overtime” to put in extra shifts, Robert Cleveland, senior vice president, North America and Europe Nutrition at Reckitt, told Reuters in an interview.

Prior to the Abbott recall, Reckitt supplied just over a third of the U.S. infant formula market compared with Abbott’s roughly 44%. Britain-based Reckitt told Reuters it now accounts for more than 50% of total baby formula supply in the country.

“We normally might pack an entire truck before we ship it. For timeliness, we’re not doing that. We’re packing it with as much product as we have and then we’re just getting it out the door,” Cleveland said.

The United States will allow baby formula imports from foreign makers that do not usually sell their products there, the Food and Drug Administration said on Monday. read more

Nestle is flying baby formula supplies to the United States from the Netherlands and Switzerland, the company said in an emailed statement to Reuters on Tuesday. L2N2X90E1

The world’s largest packaged food group is moving Gerber baby food formula to the United States from the Netherlands and Alfamino baby formula there from Switzerland, it said.

“We prioritized these products because they serve a critical medical purpose as they are for babies with cow’s milk protein allergies,” the company said. “Both products were already being imported but we moved shipments up and rushed via air to help fill immediate needs.”

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Editing by Matt Scuffham and Mark Potter

Our Standards: The Thomson Reuters Trust Principles.

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Loma Negra Reports 1Q22 results

BUENOS AIRES, Argentina–(BUSINESS WIRE)–Loma Negra, (NYSE: LOMA; BYMA: LOMA), (“Loma Negra” or the “Company”), the leading cement producer in Argentina, today announced results for the three-month period ended March 31, 2022 (our “1Q22 Results”).

1Q22 Key Highlights

The Company has presented certain financial figures, Table 1b and Table 11, in U.S. dollars and Pesos without giving effect to IAS 29. The Company has prepared all other financial information herein by applying IAS 29.

Commenting on the financial and operating performance for the first quarter of 2022, Sergio Faifman, Loma Negra’s Chief Executive Officer, noted: “We started the year in a very good way, the industry continues to show very good levels of activity with a growth of 7% in the quarter compared to the previous year. At the current rate, cement consumption is on track to hit an all-time high for the year, despite the challenges that the local economy is currently facing.

In this sense, the end of the quarter showed very good levels of profitability, with an EBITDA of 60 million dollars, 14% higher than last year, and very good profit margins. Despite the uncertainty in the international context, the scarcity, and the significant increase in the price of fuels worldwide, we were able to maintain our high levels of profitability on the back of a very good operating performance, our productive structure, and an adequate management of our energy matrix.

Likewise, during the month of April, and taking advantage of our solid financial position, we have once again paid dividends of 45 million dollars, thus continuing along the path of maximizing the return to our shareholders that we had been going before with the share repurchase plans.

Last but not least, I would like to thank all of our people and stakeholders for their commitment to Loma’s operational excellence. Supported by a robust and efficient production structure, a solid balance sheet and a dedicated team, Loma is prepared to face another challenging year.”

Table 1: Financial Highlights

(amounts expressed in millions of pesos, unless otherwise noted)

 

Three-months ended
March 31,

 

2022

2021

% Chg.

Net revenue

19,310

20,436

-5.5%

Gross Profit

6,443

7,407

-13.0%

Gross Profit margin

33.4%

36.2%

-288 bps

Adjusted EBITDA

6,484

7,299

-11.2%

Adjusted EBITDA Mg.

33.6%

35.7%

-214 bps

Net Profit (Loss)

3,134

3,983

-21.3%

Net Profit attributable to owners of the Company

3,168

4,034

-21.5%

EPS

5.4066

6.7716

-20.2%

Average outstanding shares (*)

586

596

-1.6%

Net Debt

(4,145)

993

n/a

Net Debt /LTM Adjusted EBITDA

-0.15x

0.04x

n/a

(*) Net of shares repurchased

Table 1b: Financial Highlights in Ps and in U.S. dollars (figures exclude the impact of IAS 29)

In million Ps.

Three-months ended
March 31,

 

2022

2021

% Chg.

Net revenue

18,263

12,635

44.5%

Adjusted EBITDA

6,343

4,632

36.9%

Adjusted EBITDA Mg.

34.7%

36.7%

-193 bps

Net Profit (Loss)

4,333

3,260

32.9%

Net Debt

(4,145)

993

n/a

Net Debt /LTM Adjusted EBITDA

-0.15x

0.04x

n/a

 

In million US$

Three-months ended
March 31,

 

2022

2021

% Chg.

Ps./US$, av

106.59

88.65

20.2%

Ps./US$, eop

110.98

91.99

20.6%

Net revenue

171

143

20.2%

Adjusted EBITDA

60

52

13.9%

Adjusted EBITDA Mg.

34.7%

36.7%

-193 bps

Net Profit (Loss)

41

37

10.5%

Net Debt

(37)

11

n/a

Net Debt /LTM Adjusted EBITDA

-0.15x

0.04x

n/a

Overview of Operations

Sales Volumes

Table 2: Sales Volumes2

 

 

 

Three-months ended
March 31,

 

 

2022

2021

% Chg.

Cement, masonry & lime

MM Tn

1.48

1.38

6.6%

Concrete

MM m3

0.12

0.16

-25.2%

Railroad

MM Tn

1.05

0.99

6.2%

Aggregates

MM Tn

0.24

0.18

35.6%

2 Sales volumes include inter-segment sales

Sales volumes of cement, masonry, and lime during 1Q22 increased by 6.6% to 1.5 million tons, mainly leveraged by the growth of bulk cement. Sales of bagged cement remained solid due to a sustained demand from the retail sector, while bulk cement was driven by a higher level of activity in small and medium-scale infrastructure projects, both private and public.

Regarding the volume of the Concrete segment, it registered a YoY drop of 25.2%. 1Q21 was positively affected by specific infrastructure projects. The volume of concrete maintains its trend, still below historic levels due to the lack of relevant projects, both private and public in the markets where we operate. On the other hand, Aggregates had an increase of 35.6% YoY sustained mainly by the reactivation of certain roadworks in the Buenos Aires area.

Likewise, the volumes of the Railway segment experienced an increase of 6.2% compared to the same quarter of 2021, leveraged mainly on the higher transported volume of construction materials and chemicals, while there was a decrease in the transport of frac sand.

Review of Financial Results

Table 3: Condensed Interim Consolidated Statements of Profit or Loss and Other Comprehensive Income

(amounts expressed in millions of pesos, unless otherwise noted)

 

Three-months ended
March 31,

 

2022

2021

% Chg.

Net revenue

19,310

20,436

-5.5%

Cost of sales

(12,867)

(13,029)

-1.2%

Gross profit

6,443

7,407

-13.0%

Share of loss of associates

n/a

Selling and administrative expenses

(1,827)

(1,674)

9.2%

Other gains and losses

30

66

-54.6%

Impairment of property, plant and equipment

n/a

Tax on debits and credits to bank accounts

(191)

(194)

-1.4%

Finance gain (cost), net

Gain on net monetary position

849

866

-2.0%

Exchange rate differences

(153)

33

n/a

Financial income

18

65

-71.5%

Financial expense

(493)

(744)

-33.8%

Profit (Loss) before taxes

4,676

5,825

-19.7%

Income tax expense

Current

(1,892)

(2,412)

-21.5%

Deferred

351

569

-38.3%

Net profit (Loss)

3,134

3,983

-21.3%

Net Revenues

Net revenue decreased 5.5% to Ps. 19,310 million in 1Q22, from Ps. 20,436 million in the comparable quarter last year, driven by a decrease in Cement and Concrete, partially offset by an improvement in Aggregates and in the Railway segment.

Cement, masonry cement and lime segment was down 6.5% YoY, with volumes expanding 6.6% impacted by price dynamics.

Concrete registered a decrease its top line of 17.5% compared with 1Q21, where the improvement in prices couldn’t compensate for the decrease in volume. The Aggregates segment posted a strong revenue increase of 89.0%, as higher volume coupled with good price performance and a positive sales mix.

Railroad revenues increased 10.8% in 1Q22 compared to the same quarter of 2021, mainly explained by an increase in transported volumes and the improvement in prices, which offset the slight drop in the average transported distance because of the decrease in the transported volume of frac sand.

Cost of sales, and Gross profit

Cost of sales decreased 1.2% YoY, reaching Ps. 12,867 million in 1Q22, mainly as a result of a lower unit cost of sales in cement that offset the higher volume sold and the increase in depreciations due to the impact of the new production line in L’Amalí.

Gross Profit decreased 13.0% YoY to Ps. 6,443 million in 1Q22, from Ps. 7,407 million in 1Q21, with a gross profit margin that contracted 288 basis points year-on-year to 33.4%, mainly reflecting the impact of a drop in total sales.

Selling and Administrative Expenses

Selling and administrative expenses (SG&A) in 1Q22 increased by 9.2% YoY to Ps. 1,827 million, from Ps. 1,674 million in 1Q21, mainly as a result of higher expenses in marketing, IT and insurances compared with the previous year. As a percentage of sales, SG&A showed an increase against 1Q21 of 127 basis points, reaching 9.5%.

Adjusted EBITDA & Margin

Table 4: Adjusted EBITDA Reconciliation & Margin

(amounts expressed in millions of pesos, unless otherwise noted)

 

Three-months ended
March 31,

 

2022

2021

% Chg.

Adjusted EBITDA reconciliation:

Net profit (Loss)

3,134

3,983

-21.3%

(+) Depreciation and amortization

1,838

1,499

22.6%

(+) Tax on debits and credits to bank accounts

191

194

-1.4%

(+) Income tax expense

1,542

1,843

-16.3%

(+) Financial interest, net

357

584

-38.8%

(+) Exchange rate differences, net

153

(33)

n/a

(+) Other financial expenses, net

117

95

22.7%

(+) Gain on net monetary position

(849)

(866)

-2.0%

(+) Share of profit (loss) of associates

n/a

(+) Impairment of property, plant and equipment

n/a

Adjusted EBITDA

6,484

7,299

-11.2%

Adjusted EBITDA Margin

33.6%

35.7%

-214 bps

Adjusted EBITDA decreased 11.2% YoY in the first quarter of 2022 to Ps. 6,484 million from 7,299 in the same period last year.

Likewise, the Adjusted EBITDA margin contracted 214 basis points to 33.6% compared to 35.7% in 1Q21, mainly due to cement margin compression.

In particular, the Adjusted EBITDA margin of the Cement, Masonry and Lime segment decreased 332 bps to 37.4%, primarily due to lower price performance partially offset by lower cost of sales.

The Adjusted EBITDA margin for Concrete showed a significant improvement compared to 1Q21, but remaining in negative values, reaching -0.8%, from a negative margin of 10.1% in 1Q21, supported by price recovery and higher operating leverage.

The adjusted EBITDA margin of the Aggregates segment was negative at 4.6% but showing an improvement of 656 basis points compared to 1Q21, due to a strong recovery in revenues on the back of solid price performance and a positive sales mix.

Finally, the Railroad adjusted EBITDA margin improved 351 bps to 5.9% in the first quarter, from 2.4%, mainly due to the improvement in transported volume and a positive price performance.

Finance Costs-Net

Table 5: Finance Gain (Cost), net

(amounts expressed in millions of pesos, unless otherwise noted)

 

 

Three-months ended
March 31,

 

 

2022

2021

% Chg.

Exchange rate differences

(153)

33

n/a

Financial income

18

65

-71.5%

Financial expense

(493)

(744)

-33.8%

Gain on net monetary position

849

866

-2.0%

Total Finance Gain (Cost), Net

 

221

219

0.8%

During 1Q22, the Company reported a total net financial gain of Ps. 221 million compared to a total net financial gain of Ps. 219 million in 1Q21, primarily explained because of a lower net financial expense that offset the exchange rate negative effect.

Net Profit and Net Profit Attributable to Owners of the Company

Net Profit for 1Q22 reached Ps. 3,134 million compared to Ps. 3,983 million in the same period last year, mainly due to the decrease in the operational result.

Net Profit Attributable to Owners of the Company reached Ps. 3.168 million. During the quarter, the Company reported earnings per common share of Ps. 5,4066 and an ADR gain of Ps. 27.0332, compared to earnings per common share of Ps. 6.7716 and an ADR gain of Ps. 33.8579 in 1Q21.

Capitalization

Table 6: Capitalization and Debt Ratio

(amounts expressed in millions of pesos, unless otherwise noted)

 

As of March 31,

 

As of December, 31

 

2022

2021

 

2021

 

Total Debt

993

10,373

2,915

– Short-Term Debt

669

9,404

2,452

– Long-Term Debt

323

969

463

Cash, Cash Equivalents and Investments

(5,138)

(9,380)

6,118

Total Net Debt

(4,145)

993

(3,203)

Shareholder’s Equity

86,721

83,110

84,162

Capitalization

87,713

93,483

87,077

LTM Adjusted EBITDA

27,855

23,639

26,840

Net Debt /LTM Adjusted EBITDA

-0.15x

0.04x

-0.12x

As of March 31, 2022, total Cash, Cash Equivalents, and Investments were Ps. 5,138 million compared with Ps. 9,380 million as of the March 31, 2021. Total debt at the close of the quarter stood at Ps. 993 million, composed by Ps. 669 million in short-term borrowings, including the current portion of long-term borrowings (or 67.4% of total borrowings), and Ps. 323 million in long-term borrowings (or 32.6% of total borrowings).

As of March 31, 2022, 76.7% (or Ps. 761 million) of Loma Negra’s total debt was denominated in U.S. dollars and 23.3% (or Ps. 232 million) was in Argentine pesos. The average duration of Loma Negra’s total debt was 0.7 years.

As of March 31, 2022, the total of the Company’s consolidated debt accrued interest at a variable rate. The debt in US dollars bore interest at rates based on Libor, while the debt in Argentine pesos bore interest at the short-term market rate.

The Net Debt to Adjusted EBITDA (LTM) ratio decreased to -0.15x as of March 31, 2022, from -0.12x as of December 31, 2021, as a result of strong cash generation and debt reduction.

Cash Flows

Table 7: Condensed Interim Consolidated Statement of Cash Flows

(amounts expressed in millions of pesos, unless otherwise noted)

 

 

Three-months ended
March 31,

 

 

2022

2021

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

Net Profit (Loss)

 

3,134

3,983

Adjustments to reconcile net profit (loss) to net cash provided by operating activities

 

3,458

3,250

Changes in operating assets and liabilities

 

(4,285)

(2,690)

Net cash generated by operating activities

 

2,307

4,543

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

Proceeds from disposal of Yguazú Cementos S.A.

 

55

146

Property, plant and equipment, Intangible Assets, net

 

(631)

(1,585)

Contributions to Trust

 

(33)

(31)

Investments, net

(2,595)

Net cash (used in) investing activities

 

(609)

(4,066)

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

Proceeds / Repayments from borrowings, Interest paid

 

(1,860)

(688)

Share repurchase plan

(609)

(396)

Net cash generated by (used in) by financing activities

 

(2,469)

(1,084)

 

Net increase (decrease) in cash and cash equivalents

 

(771)

(606)

Cash and cash equivalents at the beginning of the year

 

3,837

7,666

Effect of the re-expression in homogeneous cash currency (“Inflation-Adjusted”)

(115)

(56)

Effects of the exchange rate differences on cash and cash equivalents in foreign currency

 

65

(238)

Cash and cash equivalents at the end of the period

 

3,015

6,766

In 1Q22, our operating cash generation stood at Ps. 2,547 million, compared to Ps. 4,543 million in the same period of the previous year, reflecting a lower level of profitability and higher working capital requirements. During this quarter, we increased our Clinker stock to minimize the impact of natural gas shortages in the winter months and take advantage of cost reduction opportunities.

During 1Q22, the Company used cash in financing and investing activities for a total of Ps. 2,469 and Ps. 603 million, respectively. The completion of the L’Amalí expansion project significantly reduced the cash allocations for investment.

Share Repurchase Plan.

On December 21, 2021, the Company announced the approval of the fourth share repurchase program, in accordance with Section 64 of Law No. 26.831 (“LMC”) and the CNV Regulations. The purpose is to efficiently apply a portion of the Company´s cash position which may result in a greater return of value for its shareholders considering the attractive value of the share with the additional possibility of allocating part of the shares acquired to implement specific compensation plans.

The plan became effective as from December 23, 2021, for an amount to invest up to Ps. 900 million or such lower amount that derives from the repurchase of up to 10% of Company’s capital stock. The maximum amount of shares or maximum percentage of the Company’s capital stock to be repurchased shall never surpass the limit of 10% of the capital stock in accordance with Section 64 of LMC.

A summary of the Share Repurchase Program that ended on February 18, 2022, is shown below:

 

Repurchase Program IV

Maximum amount for repurchase

Ps 900 million

Maximum price

Ps. 310/ordinary share or US$ 7.5/ADR

Period in force

60 days since December 23, 2021

Repurchase under the program until its completion

Ps. 643 million

Progress

71.5%

Recent Events

Dividends Distribution

On April 14, 2022, the board of directors approved the payment of dividends for a total amount of Ps. 5,150 million equivalents to Ps. 8.80 per outstanding share (Ps. 43.99 per ADS), through the partial allocation of funds from the Reserve for Future Dividends. As of the date of the presentation of this earnings release, the total amount of dividends was distributed.

1Q22 Earnings Conference Call

When:

4:00 p.m. U.S. ET (5:00 p.m. BAT), May 9, 2022

Dial-in:

0800-444-2930 (Argentina), 1-833-255-2824 (U.S.), 1-866-605-3852 (Canada), 1-412-902-6701 (International)

Password:

Loma Negra Call

Webcast:

https://services.choruscall.com/mediaframe/webcast.html?webcastid=NKQChLSM

Replay:

A telephone replay of the conference call will be available between May 10, 2022, at 1:00 pm U.S. E.T. and ending on May 16, 2022. The replay can be accessed by dialing 1-877-344-7529 (U.S. toll free), or 1-412-317-0088 (International). The passcode for the replay is 10158956. The audio of the conference call will also be archived on the Company’s website at www.lomanegra.com

Definitions

Adjusted EBITDA is calculated as net profit plus financial interest, net plus income tax expense plus depreciation and amortization plus exchange rate differences plus other financial expenses, net plus tax on debits and credits to bank accounts, plus share of loss of associates, plus net Impairment of Property, plant and equipment, and less income from discontinued operation. Loma Negra believes that excluding tax on debits and credits to bank accounts from its calculation of Adjusted EBITDA is a better measure of operating performance when compared to other international players.

Net Debt is calculated as borrowings less cash, cash equivalents and marketable securities.

About Loma Negra

Founded in 1926, Loma Negra is the leading cement company in Argentina, producing and distributing cement, masonry cement, aggregates, concrete and lime, products primarily used in private and public construction. Loma Negra is a vertically-integrated cement and concrete company, with nationwide operations, supported by vast limestone reserves, strategically located plants, top-of-mind brands and established distribution channels. Loma Negra is listed both on BYMA and on NYSE in the U.S., where it trades under the symbol “LOMA”. One ADS represents five (5) common shares. For more information, visit www.lomanegra.com.

Note

The Company presented some figures converted from Pesos to U.S. dollars for comparison purposes. The exchange rate used to convert Pesos to U.S. dollars was the reference exchange rate (Communication “A” 3500) reported by the Central Bank for U.S. dollars. The information presented in U.S. dollars is for the convenience of the reader only. Certain figures included in this report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be arithmetic aggregations of the figures presented in previous quarters.

Rounding: We have made rounding adjustments to reach some of the figures included in this annual report. As a result, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.

Disclaimer

This release contains forward-looking statements within the meaning of federal securities law that are subject to risks and uncertainties. These statements are only predictions based upon our current expectations and projections about possible or assumed future results of our business, financial condition, results of operations, liquidity, plans and objectives. In some cases, you can identify forward-looking statements by terminology such as “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “potential,” “seek,” “forecast,” or the negative of these terms or other similar expressions. The forward-looking statements are based on the information currently available to us. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including, among others things: changes in general economic, political, governmental and business conditions globally and in Argentina, changes in inflation rates, fluctuations in the exchange rate of the peso, the level of construction generally, changes in cement demand and prices, changes in raw material and energy prices, changes in business strategy and various other factors. You should not rely upon forward-looking statements as predictions of future events. Although we believe in good faith that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Any or all of Loma Negra’s forward-looking statements in this release may turn out to be wrong. You should consider these forward-looking statements in light of other factors discussed under the heading “Risk Factors” in the prospectus filed with the Securities and Exchange Commission on October 31, 2017 in connection with Loma Negra’s initial public offering. Therefore, readers are cautioned not to place undue reliance on these forward-looking statements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this release to conform these statements to actual results or to changes in our expectations.

— Financial Tables Follow —

Table 8: Condensed Interim Consolidated Statements of Financial Position

(amounts expressed in millions of pesos, unless otherwise noted)

 

 

 

As of March 31,

 

 

As of December 31,

 

 

 

2022

 

 

2021

ASSETS

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

Property, plant and equipment

 

92,953

94,359

Right to use assets

 

335

360

Intangible assets

 

304

336

Investments

 

6

6

Goodwill

 

61

61

Inventories

 

3,815

3,580

Other receivables

 

800

807

Total non-current assets

 

 

98,274

99,508

Current assets

 

 

Inventories

 

11,370

10,095

Other receivables

 

1,243

1,382

Trade accounts receivable

 

4,578

4,597

Investments

 

4,868

5,734

Cash and banks

270

384

Total current assets

 

 

22,329

22,193

TOTAL ASSETS

120,603

121,700

SHAREHOLDER’S EQUITY

 

 

Capital stock and other capital related accounts

 

23,065

23,641

Reserves

 

52,683

52,683

Retained earnings

 

10,813

7,644

Accumulated other comprehensive income

 

Equity attributable to the owners of the Company

 

86,560

83,968

Non-controlling interests

160

195

TOTAL SHAREHOLDER’S EQUITY

 

 

86,721

84,162

LIABILITIES

 

 

Non-current liabilities

 

Borrowings

 

323

463

Accounts payables

 

Provisions

 

636

659

Salaries and social security payables

 

45

59

Debts for leases

241

273

Other liabilities

 

158

166

Deferred tax liabilities

16,261

16,612

Total non-current liabilities

 

 

17,665

18,230

Current liabilities

Borrowings

 

669

2,452

Accounts payable

 

7,937

9,142

Advances from customers

 

732

1,191

Salaries and social security payables

 

2,329

2,361

Tax liabilities

 

4,313

3,883

Debts for leases

79

92

Other liabilities

160

186

Total current liabilities

 

 

16,218

19,308

TOTAL LIABILITIES

 

 

33,882

37,538

TOTAL SHAREHOLDER’S EQUITY AND LIABILITIES

 

 

120,603

121,700

Table 9: Condensed Interim Consolidated Statements of Profit or Loss and Other Comprehensive Income (unaudited)

(amounts expressed in millions of pesos, unless otherwise noted)

 

 

Three-months ended
March 31,

 

 

2022

2021

% Change

Net revenue

19,310

20,436

-5.5%

Cost of sales

(12,867)

(13,029)

-1.2%

Gross Profit

 

6,443

7,407

-13.0%

Share of loss of associates

n/a

Selling and administrative expenses

(1,827)

(1,674)

9.2%

Other gains and losses

30

66

-54.6%

Impairment of property, plant and equipment

n/a

Tax on debits and credits to bank accounts

(191)

(194)

-1.4%

Finance gain (cost), net

Gain on net monetary position

849

866

-2.0%

Exchange rate differences

(153)

33

n/a

Financial income

18

65

-71.5%

Financial expenses

(493)

(744)

-33.8%

Profit (loss) before taxes

 

4,676

5,825

-19.7%

Income tax expense

Current

(1,892)

(2,412)

-21.5%

Deferred

351

569

-38.3%

Net Profit (Loss)

 

3,134

3,983

-21.3%

Net Profit (Loss) for the period attributable to:

Owners of the Company

3,168

4,034

-21.5%

Non-controlling interests

(34)

(51)

-33.1%

NET PROFIT (LOSS) FOR THE PERIOD

 

3,134

3,983

-21.3%

Earnings per share (basic and diluted):

 

5.4066

6.7716

-20.2%

Table 10: Condensed Interim Consolidated Statement of Cash Flows

(amounts expressed in millions of pesos, unless otherwise noted)

 

 

 

Three-months ended
March 31,

 

 

2022

2021

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

Net Profit (Loss)

3,134

3,983

Adjustments to reconcile net profit to net cash provided by operating activities

 

Income tax expense

 

1,542

1,843

Depreciation and amortization

 

1,838

1,499

Provisions

 

42

(1)

Exchange rate differences

(179)

(235)

Interest expense

 

165

154

Share of loss of associates

Gain on disposal of property, plant and equipment

(15)

(30)

Gain on disposal of shareholding of Yguazú Cementos S.A.

Impairment of property, plant and equipment

Impairment of trust fund

32

20

Share-based payment

33

Changes in operating assets and liabilities

 

Inventories

 

(1,163)

(812)

Other receivables

19

(423)

Trade accounts receivable

(709)

(624)

Advances from customers

(389)

(34)

Accounts payable

(523)

261

Salaries and social security payables

 

291

255

Provisions

 

(40)

(14)

Tax liabilities

 

120

177

Other liabilities

 

(32)

(84)

Gain on net monetary position

(849)

(866)

Income tax paid

 

(1,011)

(526)

Net cash generated by (used in) operating activities

 

2,307

4,543

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

Proceeds from disposal of Yguazú Cementos S.A.

55

146

Proceeds from disposal of Property, plant and equipment

 

1

58

Payments to acquire Property, plant and equipment

(632)

(1,643)

Payments to acquire Intangible Assets

 

(0)

Acquire investments

(2,595)

Proceeds from maturity investments

Contributions to Trust

 

(33)

(31)

Net cash generated by (used in) investing activities

 

(609)

(4,066)

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

Proceeds from borrowings

 

888

137

Interest paid

 

(138)

(274)

Dividends paid

0

Debts for leases

(28)

(60)

Repayment of borrowings

(2,581)

(491)

Share repurchase plan

(609)

(396)

Net cash generated by (used in) financing activities

 

(2,469)

(1,084)

Net increase (decrease) in cash and cash equivalents

 

(771)

(606)

Cash and cash equivalents at the beginning of the period

 

3,837

7,666

Effect of the re-expression in homogeneous cash currency (“Inflation-Adjusted”)

(115)

(56)

Effects of the exchange rate differences on cash and cash equivalents in foreign currency

 

65

(238)

 

Cash and cash equivalents at the end of the period

 

3,015

6,766

 

Table 11: Financial Data by Segment (figures exclude the impact of IAS 29)

(amounts expressed in millions of pesos, unless otherwise noted)

 

 

Three-months ended March 31,

 

 

2022

%

2021

%

Net revenue

 

18,263

100.0%

12,635

100.0%

Cement, masonry cement and lime

16,180

88.6%

11,317

89.6%

Concrete

1,379

7.6%

1,086

8.6%

Railroad

1,548

8.5%

914

7.2%

Aggregates

376

2.1%

129

1.0%

Others

151

0.8%

72

0.6%

Eliminations

(1,370)

-7.5%

(883)

-7.0%

Cost of sales

 

10,847

100.0%

7,403

100.0%

Cement, masonry cement and lime

8,958

82.6%

6,043

81.6%

Concrete

1,312

12.1%

1,160

15.7%

Railroad

1,478

13.6%

906

12.2%

Aggregates

375

3.5%

132

1.8%

Others

94

0.9%

44

0.6%

Eliminations

 

(1,370)

-12.6%

(883)

-11.9%

Selling, admin. expenses and other gains & losses

 

1,667

100.0%

943

100.0%

Cement, masonry cement and lime

1,467

88.0%

840

89.1%

Concrete

67

4.0%

22

2.4%

Railroad

84

5.0%

55

5.8%

Aggregates

4

0.2%

2

0.2%

Others

 

45

2.7%

24

2.6%

Depreciation and amortization

 

594

100.0%

343

100.0%

Cement, masonry cement and lime

454

76.4%

253

73.6%

Concrete

11

1.8%

17

4.9%

Railroad

122

20.5%

67

19.5%

Aggregates

7

1.1%

6

1.7%

Others

 

1

0.2%

1

0.3%

Adjusted EBITDA

 

6,343

100.0%

4,632

100.0%

Cement, masonry cement and lime

6,208

97.9%

4,687

101.2%

Concrete

11

0.2%

(80)

-1.7%

Railroad

107

1.7%

20

0.4%

Aggregates

3

0.0%

1

0.0%

Others

 

14

0.2%

5

0.1%

Reconciling items:

Effect by translation in homogeneous cash currency (“Inflation-Adjusted”)

141

2,667

Depreciation and amortization

(1,838)

(1,499)

Tax on debits and credits banks accounts

(191)

(194)

Finance gain (cost), net

221

219

Income tax

(1,542)

(1,843)

Share of profit of associates

Impairment of property, plant and equipment

NET PROFIT (LOSS) FOR THE PERIOD

 

3,134

3,983

 

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Masaru Tagami, who is in charge of facilities procurement for the central Japanese city Hida, one of Hope Energy’s former clients, said it had been caught off guard by the company’s “sudden” collapse and the rise in costs as its business was handed to another firm.

The city’s annual electric bill is expected to rise 40 percent, he said, adding that the situation had played havoc with its budget. “I am seriously worried about how long these circumstances will continue,” he said.

Power companies hit hard by the pandemic-related spike expected that prices would abate by this March as the effects on supply chains wore off, said Junichi Ogasawara, a senior research fellow at the Institute of Energy Economics Japan.

“But with Russia’s invasion of Ukraine, the situation has changed to one where the current conditions will drag on,” he said.

Since then, the precariousness of Japan’s energy situation has only become clearer. In March, after an earthquake near Fukushima knocked out part of the electrical grid, a cold snap pushed Tokyo to the brink of rolling power outages. In the past, coal-fired power stations could have been called upon for cheap backup energy, but inefficient old plants have been taken offline.

In a disaster-prone country like Japan, “we’re still in a position where these kinds of things can happen again” unless the government fixes the issues introduced by deregulation and the patchwork shift to renewables, said Dan Shulman, the chief executive of Shulman Advisory, a firm analyzing Japan’s power industry.

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How Intel Makes Semiconductors in a Global Shortage

Some feature more than 50 billion tiny transistors that are 10,000 times smaller than the width of a human hair. They are made on gigantic, ultraclean factory room floors that can be seven stories tall and run the length of four football fields.

Microchips are in many ways the lifeblood of the modern economy. They power computers, smartphones, cars, appliances and scores of other electronics. But the world’s demand for them has surged since the pandemic, which also caused supply-chain disruptions, resulting in a global shortage.

That, in turn, is fueling inflation and raising alarms that the United States is becoming too dependent on chips made abroad. The United States accounts for only about 12 percent of global semiconductor manufacturing capacity; more than 90 percent of the most advanced chips come from Taiwan.

Intel, a Silicon Valley titan that is seeking to restore its longtime lead in chip manufacturing technology, is making a $20 billion bet that it can help ease the chip shortfall. It is building two factories at its chip-making complex in Chandler, Ariz., that will take three years to complete, and recently announced plans for a potentially bigger expansion, with new sites in New Albany, Ohio, and Magdeburg, Germany.

Why does making millions of these tiny components mean building — and spending — so big? A look inside Intel production plants in Chandler and Hillsboro, Ore., provides some answers.

Chips, or integrated circuits, began to replace bulky individual transistors in the late 1950s. Many of those tiny components are produced on a piece of silicon and connected to work together. The resulting chips store data, amplify radio signals and perform other operations; Intel is famous for a variety called microprocessors, which perform most of the calculating functions of a computer.

Intel has managed to shrink transistors on its microprocessors to mind-bending sizes. But the rival Taiwan Semiconductor Manufacturing Company can make even tinier components, a key reason Apple chose it to make the chips for its latest iPhones.

Such wins by a company based in Taiwan, an island that China claims as its own, add to signs of a growing technology gap that could put advances in computing, consumer devices and military hardware at risk from both China’s ambitions and natural threats in Taiwan such as earthquakes and drought. And it has put a spotlight on Intel’s efforts to recapture the technology lead.

Chip makers are packing more and more transistors onto each piece of silicon, which is why technology does more each year. It’s also the reason that new chip factories cost billions and fewer companies can afford to build them.

In addition to paying for buildings and machinery, companies must spend heavily to develop the complex processing steps used to fabricate chips from plate-size silicon wafers — which is why the factories are called “fabs.”

Enormous machines project designs for chips across each wafer, and then deposit and etch away layers of materials to create their transistors and connect them. Up to 25 wafers at a time move among those systems in special pods on automated overhead tracks.

Processing a wafer takes thousands of steps and up to two months. TSMC has set the pace for output in recent years, operating “gigafabs,” sites with four or more production lines. Dan Hutcheson, vice chair of the market research firm TechInsights, estimates that each site can process more than 100,000 wafers a month. He puts the capacity of Intel’s two planned $10 billion facilities in Arizona at roughly 40,000 wafers a month each.

After processing, the wafer is sliced into individual chips. These are tested and wrapped in plastic packages to connect them to circuit boards or parts of a system.

That step has become a new battleground, because it’s more difficult to make transistors even smaller. Companies are now stacking multiple chips or laying them side by side in a package, connecting them to act as a single piece of silicon.

Where packaging a handful of chips together is now routine, Intel has developed one advanced product that uses new technology to bundle a remarkable 47 individual chips, including some made by TSMC and other companies as well those produced in Intel fabs.

Intel chips typically sell for hundreds to thousands of dollars each. Intel in March released its fastest microprocessor for desktop computers, for example, at a starting price of $739. A piece of dust invisible to the human eye can ruin one. So fabs have to be cleaner than a hospital operating room and need complex systems to filter air and regulate temperature and humidity.

Fabs must also be impervious to just about any vibration, which can cause costly equipment to malfunction. So fab clean rooms are built on enormous concrete slabs on special shock absorbers.

Also critical is the ability to move vast amounts of liquids and gases. The top level of Intel’s factories, which are about 70 feet tall, have giant fans to help circulate air to the clean room directly below. Below the clean room are thousands of pumps, transformers, power cabinets, utility pipes and chillers that connect to production machines.

Fabs are water-intensive operations. That’s because water is needed to clean wafers at many stages of the production process.

Intel’s two sites in Chandler collectively draw about 11 million gallons of water a day from the local utility. Intel’s future expansion will require considerably more, a seeming challenge for a drought-plagued state like Arizona, which has cut water allocations to farmers. But farming actually consumes much more water than a chip plant.

Intel says its Chandler sites, which rely on supplies from three rivers and a system of wells, reclaim about 82 percent of the freshwater they use through filtration systems, settling ponds and other equipment. That water is sent back to the city, which operates treatment facilities that Intel funded, and which redistributes it for irrigation and other nonpotable uses.

Intel hopes to help boost the water supply in Arizona and other states by 2030, by working with environmental groups and others on projects that save and restore water for local communities.

To build its future factories, Intel will need roughly 5,000 skilled construction workers for three years.

They have a lot to do. Excavating the foundations is expected to remove 890,000 cubic yards of dirt, carted away at a rate of one dump truck per minute, said Dan Doron, Intel’s construction chief.

The company expects to pour more than 445,000 cubic yards of concrete and use 100,000 tons of reinforcement steel for the foundations — more than in constructing the world’s tallest building, the Burj Khalifa in Dubai.

Some cranes for the construction are so large that more than 100 trucks are needed to bring the pieces to assemble them, Mr. Doron said. The cranes will lift, among other things, 55-ton chillers for the new fabs.

Patrick Gelsinger, who became Intel’s chief executive a year ago, is lobbying Congress to provide grants for fab construction and tax credits for equipment investment. To manage Intel’s spending risk, he plans to emphasize construction of fab “shells” that can be outfitted with equipment to respond to market changes.

To address the chip shortage, Mr. Gelsinger will have to make good on his plan to produce chips designed by other companies. But a single company can do only so much; products like phones and cars require components from many suppliers, as well as older chips. And no country can stand alone in semiconductors, either. Though boosting domestic manufacturing can reduce supply risks somewhat, the chip industry will continue to rely on a complex global web of companies for raw materials, production equipment, design software, talent and specialized manufacturing.


Produced by Alana Celii

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