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) is a Peru-based company engaged in the production, distribution and sale of cement and related construction materials. Its product portfolio includes cement, ready-mix concrete, mortar, concrete products, aggregates and quicklime, serving residential, commercial, industrial and infrastructure construction markets.

Founded in 1949, the company primarily serves northern and northeastern Peru through an integrated network of manufacturing plants, distribution facilities and sales channels. Its principal operations include the Pacasmayo cement plant in the La Libertad region and facilities associated with its operations in Piura and Rioja. The company also provides technical assistance and other services connected with construction and building-material applications.

Cementos Pacasmayo is publicly traded in Peru and has American depositary shares listed on the New York Stock Exchange under the symbol CPAC. The company is part of the Peruvian construction-materials industry and focuses on supplying products for housing development, infrastructure projects and general construction activity in the markets it serves.

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

[Operator]

I'll call over to your question. 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 filing. With that, I'd now like to turn the call over to you.

[Humberto Reynaldo Nadal Del Carpio, CEO at Cementos Pacasmayo]

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. 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 stages in that period, but we have already seen the signs of recovering. Therefore, we remain very confident that the positive momentum will carry through the rest of the year. Consolidated EBITDA was PEN 134.7 million 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 Reynaldo Nadal Del Carpio, CEO at Cementos Pacasmayo]

To help grow these long-term agreements, we offer a higher bonus in the first year, which naturally increases expenses. Since 2025 marks the start of a new cycle, we're seeing that impact now, but it's important to note that this effect evens out over the next two years. Turning on to the product 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 Reynaldo Nadal Del Carpio, CEO at Cementos Pacasmayo]

What is most important is that these results are not the outcome of short-term actions. They are the solid result of a clear long-term strategy. Over the past few years, we have invested significant time and effort in prospecting and focusing on improving the products and services we offer. We knew that if we wanted to promote concrete over 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 precast solutions. Using key technology, including AI, we have been able to identify and tackle a much larger number of projects and therefore generate a successful strategy to give the use of concrete and concrete-based products for infrastructure projects. This has allowed us to position ourselves as a preferred choice for infrastructure development in Northern Peru.

[Humberto Reynaldo Nadal Del Carpio, CEO at Cementos Pacasmayo]

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. Cement is a foundation for better housing, better infrastructure, and better opportunities for millions of 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, sugar cane is abundant, and its byproduct, sugar trash, offers great potential as a clean fuel.

[Humberto Reynaldo Nadal Del Carpio, CEO at Cementos Pacasmayo]

After successful lab tests this quarter, we advanced to industrial-scale trials, and the results so far have been very, very promising. In parallel, we're also moving ahead in the use of end-of-life tires and other waste-to-fuels, continuing to seek innovative solutions that protect both the environment and affordability in order to assist to a sustainable economic, social, and environmental impact that our country needs. I will now turn the call over to Ely to get more into detail the financial analysis.

[Ely Adriana Hayashi Hiraoka, Corporate Finance Manager at Cementos Pacasmayo]

Thank you, Humberto. Good morning, everyone. This quarter's revenues increased 4.8% compared to the third quarter of 2024, mainly due to the increase in sales of bagged cement and concrete and pavement, reaching PEN 499.2 million. During this same period, gross profit increased 5.5% 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 $134.7 million this quarter, a 1.4% increase when compared to the same period of 2024, mainly due to the previously mentioned increase in operating income, partially offset by some increased expense. Turning on to operating expenses, administrative expenses for the first quarter of 2025 increased 22.4% when compared to the first quarter of 2024, mainly due to increased personnel expenses because of the union bonus.

[Ely Adriana Hayashi Hiraoka, Corporate Finance Manager at Cementos Pacasmayo]

In an effort to optimize time and resources, collective bargaining agreements with our labor unions are performed every three years. As an incentive to close this multi-year agreement, we offer a higher bonus for the first year, therefore increasing expenses. Selling expenses increased 18.8% during the first quarter of 2025 when compared to the same period of 2024, mainly due to increased advertising and promotion expenses, as well as the union bonus mentioned before. 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% during this same period when compared to the first quarter of 2024, mainly due to lower cost of raw materials such as coal and cement additives.

[Ely Adriana Hayashi Hiraoka, Corporate Finance Manager at Cementos Pacasmayo]

During this quarter, concrete, pavement, and mortar sales increased 22.3% 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 2025 when compared to the same period of last year. 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 the execution of the Piura Airport project, as this extended over our planned execution period.

[Ely Adriana Hayashi Hiraoka, Corporate Finance Manager at Cementos Pacasmayo]

We remain confident that developing building solutions is the right path for our company, even if it entails some short-term learning curve additional costs. Regarding precast materials, sales increased 6.8% this quarter compared to the first quarter of 2024, mainly due to an increase in sales volumes 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. Moving back to our consolidated results, net profit increased 6.5% this quarter when compared to the same period of last year, mainly due to increased revenues and gross profits, as well as an increase in other income and a slight reduction in financing expenses.

[Ely Adriana Hayashi Hiraoka, Corporate Finance Manager at Cementos Pacasmayo]

During the first quarter of last year, we had a one-off expense related to the reconstruction of the road that connects our quarry to the Piura plant. Finally, in terms of debt, our net debt-to-EBITDA ratio was 2.6 times, below the level obtained the previous quarter as we continued deleveraging. To summarize, this quarter's financial results show our ability to benefit from better market conditions while managing costs in order to achieve profitability. We are confident that we will continue delivering positive results during the rest of the year. Operator can now open the call for proposals.

[Operator]

Thank you. We will now move to the question and answer section. If you'd like to ask a question, please press star two 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. Okay, our first question is from Tunde Ojo from Harding Loevner. Is it worth continuing the sales of concrete, pavement, precast, and construction supplies when you barely make any money on it?

[Humberto Reynaldo Nadal Del Carpio, CEO at Cementos Pacasmayo]

Thank you, Tunde, for your question. We have to look at this more from our overall company strategy. I mean, we said it, and I think Ely mentioned it, building solutions is a 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%, it's because we're getting closer to the end consumer in terms of bridges, in terms of airports, in terms of all sorts of solutions. Of course, I mean, at some point, the profitability may not be the best one, but in the end, we're selling cement in places we're not selling before.

[Humberto Reynaldo Nadal Del Carpio, CEO at Cementos Pacasmayo]

You 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. If we retire here, I think we would be giving up a very solid presence on the market that we've been for years and years defending. Like I said, you have to look not only at the specific business, and also, I mean, when we talk about projects like Motupe, La Leche, or the Tarata Bridge and Yanacocha, when you have large concrete projects, then the markets will be there. Sometimes, I mean, the projects are smaller, so the markets may be not as we expect them, but in the end, I mean, we remain confident that building solutions is the 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 J.P. Morgan]

Thank you. Hi, everyone. Good morning. Thank you for taking my question. I wanted to ask on the SG&A increase you mentioned due to the labor union bonus. I understand that it is for the rest of 2025, so should we expect a similar year-over-year increase in SG&A in the coming quarters and thus maybe a flat EBITDA margin for the full year?

[Humberto Reynaldo Nadal Del Carpio, CEO at Cementos Pacasmayo]

Thank you for the question. I mean, what we have seen in this quarter is, I mean, we've had an extraordinary expense, close to $9 million right today. This is a one-time off. You are not going to see it in the rest of the year. What you are going to see, the EBITDA margin should be stable towards the rest of the year.

[Natalia Leo Paniagua, Equity Research Associate at J.P. Morgan]

Okay, thank you. Can you repeat the impact, how the amount in soles or dollars? I do not know what you mentioned.

[Humberto Reynaldo Nadal Del Carpio, CEO at Cementos Pacasmayo]

Sorry. I mean, I think about, let me rephrase what I asked. I mean, the 9.2 is solid, but this is a provision that's going to be stable. I mean, still the rest of it's going to 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. The next, I mean, year and year after that, which there's no year-end negotiations, then you're going to see a lower amount. I don't know, maybe my explanation was kind of confusing.

[Natalia Leo Paniagua, Equity Research Associate at J.P. Morgan]

Okay. Perfect. Thank you.

[Operator]

Okay, thanks. Our next question is from Gabriel Perez from Credicorp. 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 Reynaldo Nadal Del Carpio, CEO at Cementos Pacasmayo]

I think the rest of the year, we're going to see an increase in the concrete volumes because what we mentioned, Yanacocha, some of the projects are just starting. They still need more traction, so the volume demands will be higher in the rest of the year. That being said, I mean, we still have hope that the Chavimochic new phase that's going to be a G2G will come sometime in this year. I think, yeah, if we were to look at the rest of the year, probably you're going to see concrete volumes going higher for the remaining of the year.

[Operator]

Okay, thanks. Our next question is from Marcelo from Itaú. Your line is now open. Please go ahead.

[Marcelo Sá, SVP at Itaú]

Yes, thanks. Hi, everyone. Good morning. Thanks for taking my question. The question is related to capital allocation. Going forward here, I'd like to see, you know, as the company has this lack of new projects for the future years and leverage is under control. I'd like to understand if you guys see dividends as an avenue for capital allocation here going forward or also increasing the leveraging story here. This would be helpful. Thank you.

[Humberto Reynaldo Nadal Del Carpio, CEO at Cementos Pacasmayo]

Thank you for the question. Like Ely mentioned, I mean, we have delivered, continue delivering compared to last year. The path is going to be the same. Part of our obligations are a club deal with two banks here. I think we have five years remaining. That is going to mean the company will deliver in the coming years. Like you said correctly, I mean, we have no big CapEx coming up. The path is going to be to keep a solid dividend policy and at the same time lowering the debt.

[Operator]

Okay, thanks. Our next question comes from Gerald Fort from AFP Integra. Could you comment on the production and sale of lime? Going forward, will you stop reporting this segment? Would it be included under others? What explains? Perhaps we can take this one first and then we can go to the next question. There were three questions on this.

[Humberto Reynaldo Nadal Del Carpio, CEO at Cementos Pacasmayo]

I mean, the answer is yes, we're going to continue the production of lime, even though some years it may be pretty immaterial, 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 the CapEx, I mean, I think I mentioned before, we have fundamentally sustaining CapEx, which is around PEN 100 million every year. That should be even out during the year. In terms of advertising and media expenses, I mean, we believe that the market is requiring for us to do a higher investment in terms of presence, in terms of marketing, in terms of all the events we do with our commercial associates.

[Humberto Reynaldo Nadal Del Carpio, CEO at Cementos Pacasmayo]

That is why we have this year allocated a higher expense than we have normally been doing in the past. I mean, that should be not so high 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. 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'll just wait a moment or two for questions to come in. We have a question from Marco Mejia from Kallpa Securities. Thanks for the presentation. We have seen a recovery in the dispatches year-on-year this quarter. Do you expect this trend to continue in the current quarter? What about the concrete dispatches? Do we expect a downward in the volumes next quarter?

[Humberto Reynaldo Nadal Del Carpio, CEO at Cementos Pacasmayo]

The answer is yes. I mean, I think we mentioned before, I mean, we've had a 5% year-over-year growth compared to the same quarter of last year. We think the rest of the year should keep this trend. I mean, definitely we're going to see this year, or at least we hope this year to close with a positive number in terms of growth in terms of dispatches. Talking about concrete, and I think I mentioned it before, as Yanacocha picks up more traction and other concrete projects come in, I think also concrete should have a very, very good year.

[Operator]

Thank you. Just once again, please press star two on your phone and wait for the prompt. 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, looks like we have no further questions. Thank you, everyone who participated. Perhaps I will now hand it back to the Cementos Pacasmayo team for the closing remarks.

[Humberto Reynaldo Nadal Del Carpio, 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've 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 Peruvians. 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 uninhibited. Thank you, everyone, for the interest in our company. Thank you for joining us this morning.

[Humberto Reynaldo Nadal Del Carpio, CEO at Cementos Pacasmayo]

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.

[Operator]

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

Participants

Analysts

• Ely Adriana Hayashi Hiraoka, Corporate Finance Manager at Cementos Pacasmayo
• Marcelo Sá, SVP at Itaú
• Natalia Leo Paniagua, Equity Research Associate at J.P. Morgan
• Humberto Reynaldo Nadal Del Carpio, CEO at Cementos Pacasmayo