Cementos Pacasmayo SAA Q1 FY2025 earnings call

• Revenue recovery: Revenues up 4.8% y-o-y due to stronger demand for bagged cement and concrete in infrastructure projects, though March rain impacted sales temporarily.
• EBITDA: Consolidated EBITDA $134.7 million, up 1.4% y-o-y, with higher expenses from collective bargaining negotiations but expecting the effect to even out over next two years.
• Strategy progress: Concrete, pavement, and mortar sales up 22.3% y-o-y driven by major infrastructure projects like Motupe riverbank defenses, Yanacocha, and Tarata bridge; long-term strategy focused on early involvement in projects to promote concrete use.
• Decarbonization: Progress in biomass (sugarcane byproduct) and waste-derived fuels trials, aiming for cleaner alternatives without increasing costs for end-users.

Consolidated revenues for Pacasmayo's First Quarter 2025 increased 4.8% year-over-year to PEN499.2 million. Cement sales saw a 3.9% increase y-o-y, with a gross margin up 2.6% due to lower raw material costs. Concrete, pavement, and mortar sales jumped 22.3% y-o-y, driven by infrastructure projects, but gross margin decreased 6.5 percentage points. Precast materials sales rose 6.8% y-o-y, though gross margin was 1.8 percentage points lower. Consolidated EBITDA was $134.7 million, a 1.4% increase y-o-y despite higher expenses from collective bargaining negotiations.

• Confidence in positive momentum: Believes positive sales trend will continue through rest of 2025.
• EBITDA margin: Expect EBITDA margin to be stable for rest of the year as one-time labor bonus expense effect evens out.
• Concrete volumes: Anticipates higher concrete volumes in rest of 2025 due to ongoing infrastructure projects like Yanacocha and potential new projects like Mochica G2G.
• Capital allocation: Plans to maintain solid dividend policy while continuing deleveraging, with no major CapEx expected.

• Weather impact: March rain affected sales, though signs of recovery seen.
• Exchange rate risk: Fluctuations in exchange rates impacted margins for projects like the Piura Airport project.
• Materiality risk: Lime production may be immaterial but will continue as long as opportunity exists, with reporting based on materiality.

Q: Is it worth continuing the sales of concrete pavement, precast and construction supplies when you barely make any money on it?

A: Humberto Nadal stated that building solutions is part of the long-term strategy, as they are expanding market presence and making decent margins on cement, and large concrete projects will secure stable demand moving forward.

Q: SG&A increase due to labor union bonus; should we expect similar year-over-year increase in SG&A in coming quarters and flat EBITDA margin?

A: Humberto Nadal explained the one-time nature of the labor bonus expense, stating it won't repeat in subsequent quarters and EBITDA margin should be stable for the rest of the year.

Q: Given infrastructure projects, do you expect to maintain concrete volumes in 2025 and new projects?

A: Humberto Nadal said concrete volumes will increase in the rest of 2025 due to ongoing projects and potential new projects like Mochica G2G.

Q: Capital allocation and dividends; will dividends be an avenue for capital allocation while deleveraging?

A: Humberto Nadal mentioned they will continue a solid dividend policy while lowering debt, with no major CapEx planned.

Q: Comment on production and sale of lime; will you stop reporting?

A: Humberto Nadal said they will continue producing lime as long as there's opportunity, with reporting based on materiality, and CapEx will be sustained around PEN100 million annually.