Cementos Pacasmayo S.A.A. Q1 2025 Earnings Report

Cementos Pacasmayo S.A.A. EPS Results

• Actual EPS: $0.16
• Consensus EPS: $0.14
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: N/A

Cementos Pacasmayo S.A.A. Revenue Results

• Actual Revenue: $134.84 million
• Expected Revenue: $498.00 million
• Beat/Miss: Missed by -$363.16 million
• YoY Revenue Growth: N/A

Cementos Pacasmayo S.A.A. Announcement Details

• Quarter: Q1 2025
• Date: 4/28/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, April 29, 2025
• Conference Call Time: 10:00AM ET

Cementos Pacasmayo S.A.A. (NYSE:CPAC), a cement company, produces, distributes, and sells cement and cement-related materials in Peru. It operates through three segments: Cement, Concrete, Mortar and Precast; Quicklime; and Sales of Construction Supplies. The company's cement and concrete products are used in residential and commercial construction, and civil engineering; ready-mix concrete used in construction sites; concrete precast, such as paving units or paver stones for pedestrian walkways, as well as other bricks for partition walls and concrete precast for structural and non-structural uses; and cement-based products. It also produces and distributes quicklime for use in steel, food, fishing, and chemical industries. In addition, the company sells and distributes other construction materials manufactured by third parties, such as steel rebar, plastic pipes, and electrical wires. It offers its products directly to other retailers, private construction companies, and government entities through a network of independent retailers and hardware stores. The company was incorporated in 1949 and is headquartered in Lima, Peru. Cementos Pacasmayo S.A.A. is a subsidiary of Inversiones ASPI S.A.

Cementos Pacasmayo S.A.A. Q1 2025 Earnings Call Transcript

Key Takeaways

• This quarter, revenues increased 4.8% year-over-year and consolidated EBITDA rose 1.4% despite higher labor-related expenses.
• Sales of concrete, pavement and mortar jumped 22.3% driven by major infrastructure projects like the Motupe riverbank defenses, Yanacocha shipments and the Tarata Bridge.
• One-time collective bargaining bonuses inflated SG&A in Q1, but management expects this expense to normalize over the next two years and margins to remain stable.
• Decarbonization efforts advanced with successful industrial trials of sugarcane biomass and end-of-life tire fuels, aiming to reduce coal dependence without raising prices.
• Net debt to EBITDA fell to 2.6x as the company continues deleveraging, maintains a solid dividend policy and sustains annual CapEx around S/100 million.

Presentation

[Claudia Bustamante, Investor Relation Manager at Cementos Pacasmayo]

The call over to your questions. Please note that this call will include certain forward looking statements. These statements relate to expectations, beliefs, projections, trends, and other matters that are not historical facts and are therefore subject to risks and uncertainties that might affect future events or results. Descriptions of these risks are set forth in the company's regulatory filings. With that, I'd now like to turn the call over to

[Humberto Nadal Del Caprio, CEO at Cementos Pacasmayo]

Mr. Gonzalez. Thank you, Claudia. Welcome, everyone, to today's conference call, and thank you for joining us today. I would like to begin with a brief overview of this quarter's results.

[Humberto Nadal Del Caprio, CEO at Cementos Pacasmayo]

This quarter, we saw a very solid recovery in revenues, up 4.8% year over year as a result of stronger demand for bagged cement as well as concrete for infrastructure projects. We did face some rain in March that impacted sales during that period, but we have already seen the signs of recovery. Therefore, we remain very confident that the positive momentum will carry for the rest of the year. Consolidated EBITDA was $134,700,000 this quarter, a 1.4% increase when compared to the same period of last year despite an increase in expenses related to our collective bargaining negotiations. To optimize our time and resources, we negotiate collective bargaining agreements with our labor unions every three years.

[Humberto Nadal Del Caprio, CEO at Cementos Pacasmayo]

To help grow these long term agreements, we offer a higher bonus in the first year, which naturally increase expenses. Since 2025 marks the start of a new cycle, we are seeing that that impact now, but it's important to know that this effect evens out over the next two years. Turning on to the progress of our strategy, I would like to focus on the positive results achieved in concrete, pavement and mortar this quarter with an increase of 22.3% year over year, driven by the execution of three major infrastructure projects and the steady growth in pavement sales. We are currently supplying concrete for the Motupe riverbank defenses, and we have also started shipments for a large project in Yanacocha as well as the Tarata Bridge. These projects will continue over the next quarters, securing stable demand moving forward.

[Humberto Nadal Del Caprio, CEO at Cementos Pacasmayo]

But what's most important is that these results are not the outcome of short term actions. They're the solid result of a clear long term strategy. Over the past few years, we've invested significant time and effort in perspective and focusing on improving the products and services we offer. We knew that if we wanted to promote concrete of our other materials, we needed to go back several steps, getting involved early, even before technical files were drafted, and showing decision makers the true benefits of concrete and precut solutions. Using key technology, including IA, we have been able to identify and tackle a much larger number of projects and therefore generate a successful strategy to keep the use of concrete and concrete based products for infrastructure projects.

[Humberto Nadal Del Caprio, CEO at Cementos Pacasmayo]

This has allowed us to position ourselves as a preferred choice for infrastructure development in Northern Peru. We are certain that this is just the beginning, and we are confident that the momentum will continue to build in the coming quarters. Finally, I would like to give you a brief update on the progress of our decarbonization strategy. We are fully aware that reducing the use of coal is key to achieving our medium and long term goals. We have also to keep fundamental in mind.

[Humberto Nadal Del Caprio, CEO at Cementos Pacasmayo]

Cement is a foundation for better housing, better construction, and better opportunities for miners and Peruvians who still live without proper homes or basic services. Our challenge is clear. We need to find cleaner alternatives without increasing the final price for those that need it the most. One part we are very excited about is biomass. In Northern Peru, sugarcane is abundant, and its byproduct, sugar brush, offers great potential as a clean fuel.

[Humberto Nadal Del Caprio, CEO at Cementos Pacasmayo]

After successful lab test this quarter, we advanced to industrial scale trials, and the response has been very, very promising. In parallel, we're also moving ahead in the use of end of life tires and out of which are our fuels, continue to seek innovative solutions that protect both the environment and affordability in order to the system to a sustainable economic, social and environmental impact that our country needs. I will now turn the call to Ellie to get more in detail the financial analysis.

[Ely Hayashi, CFO at Cementos Pacasmayo]

Thank you, Humberto. Good morning, everyone. This quarter's revenues increased 4.8 percentage compared to our first quarter of twenty twenty four, mainly due to the increase in sales of bagged cement and concrete and pavement, reaching $499,200,000. During this same period, gross profit increased 5.5 percentage when compared to the same period of the previous year, mainly due to a slight decrease in cost of raw material on top of the above mentioned improvement in revenue. Consolidated EBITDA was $134,700,000 this quarter, a 1.4 percentage increase when compared to the same period of 2024, mainly due to the previously mentioned increased operating income partially offset by some increased expense.

[Ely Hayashi, CFO at Cementos Pacasmayo]

Turning on to operating expenses. Administrative expenses for the first quarter of twenty twenty five increased 22.4% when compared to the first quarter of twenty twenty four, mainly due to increased personnel expenses because of the union's bonus. In an effort to optimize time and resources collected by gaming with our labor unions is performing every three years. As an incentive to close this multiyear agreement, we offer a higher bonus for the first year, therefore, increasing expenses. Selling expenses increased 18.8% during the first quarter of twenty twenty five when compared to the same period of 2024, mainly due to increased advertising and promotion expenses as well as the union bonus mentioned before.

[Ely Hayashi, CFO at Cementos Pacasmayo]

Moving on to a different segment. Sales of cement increased 3.9% this quarter when compared to the same period of last year, mainly due to increased demand. Gross margin increased 2.6 percentage during this same period when compared to the first quarter of twenty twenty four, mainly due to lower cost of raw materials such as cool and cement additives. During this quarter, concrete pavement and mortar sales increased 22.3 percentage when compared to the same period in 2024, mainly due to increased sales of concrete and pavement for the Piura Airport project as well as to the other infrastructure projects such as riverbank defenses, the Tarata Bridge and the Yanacocha project. However, gross margin decreased 6.5 percentage points in the first quarter of twenty twenty five when compared to the same period of last year.

[Ely Hayashi, CFO at Cementos Pacasmayo]

This decrease was mainly due to the execution of the Piura Airport project. There is a difference in exchange rate between the rate projected in the contract versus the real exchange rate as well as an increased cost related to execution of the Piura Airport project as it extended over our planned execution period. We remain confident that developing building solution is the right path for our company even if it entails some short term learning curve additional cost. Regarding precast material, sales increased 6.8 percentage this quarter compared to our first quarter of twenty twenty four, mainly due to an increase in sales volume to the public sector. However, gross margin during the first quarter of this year was 1.8 percentage points lower than in the first quarter of last year, mainly due to a lower dilution of fixed costs as we consume our inventories during the first month of the year.

[Ely Hayashi, CFO at Cementos Pacasmayo]

Moving back to our consolidated results. Net profit increased 6.5 percentage this quarter when compared to the same period of last year, mainly due to increased revenues and gross profit as well as an increase in other income and a slight reduction in financing expenses. During the first quarter of last year, we had a one off expense related to a reconstruction of the road that connects our quarry to a plant to a Piura plant. Finally, in terms of debt, our net debt to EBITDA ratio was 2.6x, below the level obtained the previous quarter as we continue deleveraging. To summarize, this quarter financial results show our ability to benefit from better market conditions while managing costs in order to achieve profitability.

[Ely Hayashi, CFO at Cementos Pacasmayo]

We are confident that we will continue delivering positive results during the rest of the year. Operator, can we now open the call

[Operator]

Thank you. So we'll now move to the question and answer section. If you'd like to ask a question, please press 2 on your phone and wait to be prompted. If you're dialed in by the web, you can type your question in the box provided or request to ask a voice question. We'll just wait a moment or two for questions to come in.

[Operator]

Okay. So our first question is from Tudy Ojo from Harding Levenor. Is it worth continuing the sales of concrete pavements, precast, and construction supplies when you barely make any money on it?

[Humberto Nadal Del Caprio, CEO at Cementos Pacasmayo]

Thank you, Tudy, for your question. The way we have to look at this is more from our overall company strategy. I mean, we said it, and I think Gary mentioned it, building solutions is our road we need to walk in. The reason right now, I mean, if you see a north, I mean, it's 25% of local cement demand when it used to be 20% is because we're getting closer to end consumer in terms of bridge, in terms of airports, in terms of all sorts of solutions. Of course, I mean, at some point, the profitability may not may not be the the best one, but in the end, we're selling cement in basis we're not selling before.

[Humberto Nadal Del Caprio, CEO at Cementos Pacasmayo]

And also, have to realize that when you talk about smaller margins, you're talking basically about the concrete in some projects that are small, but we're still making a pretty decent margin in terms of the cement. So we retire here. I think we would be giving up in a in a very solid presence of a on the market we've been for years and years defending. So like I say, you have to look not only at a specific business. And, also, I mean, when we talk about projects like Motupe, La Lecce, or the Dorado Breeds, or Yana Cotcha, we have large company projects, then the markets will be there.

[Humberto Nadal Del Caprio, CEO at Cementos Pacasmayo]

Sometimes, I mean, the the projects are smaller, so the markets maybe not as as we expected. But in the end, I mean, we remain confident that Building Solutions is a way to go ahead.

[Operator]

Okay. Thank you. Our next question comes from Natalia Leo from JPMorgan. Your line is now open. Please go ahead.

[Natalia Leo Paniagua, Equity Research Associate at JP Morgan]

Thank you. Hi, everyone. Good morning. Thank you for taking my question. I wanted to ask on the SG and A increase you mentioned due to the labor union bonus.

[Natalia Leo Paniagua, Equity Research Associate at JP Morgan]

I understand that it is for the rest of 2025. So should we expect a similar year over year increase in SG and A in the coming quarters and thus maybe a a flat EBITDA margin for the full year?

[Humberto Nadal Del Caprio, CEO at Cementos Pacasmayo]

Thank you for your question. I mean, what we have seen in this in this quarter is, I mean, we've had a an external expense close to $9,000,000 rate. So this is a onetime off. So you're not gonna see it in the rest of the year, and you what you're gonna see, the EBITDA margin should be stable towards the rest of the year.

[Natalia Leo Paniagua, Equity Research Associate at JP Morgan]

Okay. Thank you.

[Natalia Leo Paniagua, Equity Research Associate at JP Morgan]

Can you repeat the the the impact? How the amount that in in in soles or dollars? I don't know what what you mentioned.

[Humberto Nadal Del Caprio, CEO at Cementos Pacasmayo]

Sorry. I mean, think I've let me rephrase what what I asked. I mean, the 9.2 is solid, but this is a provision that's gonna be stable. I mean, there's still the rest of it's gonna be done over the rest of the year. What I was trying to say is this will happen only in the course of this year.

[Humberto Nadal Del Caprio, CEO at Cementos Pacasmayo]

The next, I mean, year and year after that, which are there's no, you know, negotiations, then you're gonna see a lower amount. I don't know. Maybe I my explanation was kind of confusing.

[Natalia Leo Paniagua, Equity Research Associate at JP Morgan]

Okay. Perfect. Thank you.

[Operator]

Okay. Thanks. Our next question is from Gabriel Perez from Credit Corp. Given the infrastructure projects the company is working on right now, do you expect to maintain this level of concrete volumes for the whole of 2025? Are there any new infrastructure projects that could increase these volumes that you foresee in the future?

[Humberto Nadal Del Caprio, CEO at Cementos Pacasmayo]

I think the rest of the year, we're gonna see an increase in the concrete volumes because when we mentioned Yanacocha, some of the projects are just starting. If you need more traction, the the the volume demand will be higher in the in the rest of the year. Now that being said, I mean, we still have a hope that the Chavimochik new phase that's gonna be in a a d two g will come sometime in in this year. So I think, yeah, if we were to look at the rest of the year, probably gonna see concrete volumes going higher for, the remaining of the year.

[Operator]

Okay. Thanks. Our next question is from Marcelo from Itau. Your line is now open. Please go ahead.

[Marcelo Furlan Palhares, Equity Research Analyst at Itau BBA]

Yes. Thank thank hi, everyone. Good morning. Thanks for taking my question. The question is related to capital allocation.

[Marcelo Furlan Palhares, Equity Research Analyst at Itau BBA]

So going forward here, I'd like to see, you know, as the company has this lack of new, projects for for the future years and, leverage is under control, so I'd like to understand if you guys see, dividends as a avenue for for capital allocation here going forward or also, increasing the deleveraging story here. So this would be helpful. Thank you.

[Humberto Nadal Del Caprio, CEO at Cementos Pacasmayo]

Thank you for the question. And like Ellie mentioned, I mean, we have delivered the continued delivering compared to last year, and the past is gonna be the same. We have a part of obligations on a club deal with two banks here. Yeah. I think we have five five years remaining.

[Humberto Nadal Del Caprio, CEO at Cementos Pacasmayo]

So that's gonna mean the company will deliver in the coming years. Like you said correctly, I mean, we have no big CapEx coming up. So the path is gonna be to keep a solid dividend policy, at the same time, lowering the debt.

[Operator]

Okay. Thanks. Our next question comes from comes from Gerard Foort from IFFE Integra. Could you comment on the production and sale of Lyme? Going forward, will you stop reporting this segment?

[Operator]

Would it be included under others? What explains perhaps we can take this one first, and then we can go to the next question. Because there were three questions on this.

[Humberto Nadal Del Caprio, CEO at Cementos Pacasmayo]

I mean, the answer is yes. We're gonna continue the production offline even though some years, it may be pretty material, but we think our presence will remain there. The fact that it's not being reported at some point has to do with the materiality of it, but we'll continue the production of that as long as we see an opportunity. In terms of of the CapEx, I mean, I I think I mentioned before, we are fundamentally sustaining CapEx, which is around a hundred million soles every year. That should be even out during the year.

[Humberto Nadal Del Caprio, CEO at Cementos Pacasmayo]

Andre, in terms of of, advertising, I mean, expenses, I mean, we believe that, the market is requiring for us to do a higher investment in terms of of presence, in terms of, of marketing, in terms of all the events we do with our with our commercial associates, and that's why we have this year located a higher expense that we have normally been doing in the in the past. But, I mean, that should be not too high in the in the in the coming in the second part of the year.

[Operator]

Thank you. Just a reminder, if you'd like to ask a question, please press star two on your phone and wait for the prompt. And if you're dialed in by the web, you can either type your question in the box provided or request to ask a voice question. We just wait a moment or two for questions to come in. So we have a question from Marco Mejia from Kaupa Security.

[Operator]

Thanks for the presentation. We have we have seen a recovery in the dispatches year on year this quarter. Do you expect this trend to continue in in the current quarter? What about the concrete dispatches? Do we expect a downward in the volumes next quarter?

[Humberto Nadal Del Caprio, CEO at Cementos Pacasmayo]

The answer is yes. I mean, I think we mentioned before. I mean, we've we've had 5% year over year growth compared to same quarter of last year, and we think the rest of the year should keep this trend. I mean, definitely, we're gonna see this year. Oh, at least we we hope this year to close with a positive number in terms of growth in terms of dispatches.

[Humberto Nadal Del Caprio, CEO at Cementos Pacasmayo]

Talking about concrete, and I think I mentioned it before, again, I got to pick up more trucks and another concrete project coming. I think also concrete should have a very, very good year.

[Operator]

Thank you. Just, once again, please press 2 on your phone and wait for the prompt. And if you're dialed in by the web, you can type your question in the box provided or request to ask a voice question. Let's just give a few more moments. Okay.

[Operator]

Looks like we have no further questions. Thank you everyone who participated. So perhaps I will now hand it back to the Cementos team for the closing remarks.

[Humberto Nadal Del Caprio, CEO at Cementos Pacasmayo]

Thank you. This quarter's results show that our strategy to expand the use of concrete is paying off, allowing us to reap the expected benefits By focusing on key projects, adapting to our clients' needs, and investing early in prospecting efforts, we built a strong foundation for sustainable growth in demand for building solutions. Furthermore, we have taken key strategic steps to achieve real progress on decarbonization, finding new ways to reduce our environmental impact without compromising affordability because we know how important our product is for improving the quality of life of Peruvian. We will continue to push forward, offering the best solutions and services to satisfy our clients' needs while building a future where economic growth, social impact, and environmental responsibility go hand in hand. Thank you everyone for, the interest in our company.

[Humberto Nadal Del Caprio, CEO at Cementos Pacasmayo]

Thank you for joining us this morning. And as always, should you have any further questions, our team will be always here ready to answer. Thank you very much. Have a great day. That

[Operator]

concludes the call for today. Thank you, and have a nice day.

Participants

Analysts

• Claudia Bustamante, Investor Relation Manager at Cementos Pacasmayo
• Humberto Nadal Del Caprio, CEO at Cementos Pacasmayo
• Ely Hayashi, CFO at Cementos Pacasmayo
• Natalia Leo Paniagua, Equity Research Associate at JP Morgan
• Marcelo Furlan Palhares, Equity Research Analyst at Itau BBA