NYSE:CPAC Cementos Pacasmayo S.A.A. Q2 2023 Earnings Report $5.58 -0.07 (-1.15%) As of 10:54 AM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Cementos Pacasmayo S.A.A. EPS ResultsActual EPS$0.14Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/ACementos Pacasmayo S.A.A. Revenue ResultsActual Revenue$119.56 millionExpected Revenue$135.57 millionBeat/MissMissed by -$16.01 millionYoY Revenue GrowthN/ACementos Pacasmayo S.A.A. Announcement DetailsQuarterQ2 2023Date7/20/2023TimeN/AConference Call DateFriday, July 21, 2023Conference Call Time9:30AM ETUpcoming EarningsCementos Pacasmayo S.A.A.'s Q1 2025 earnings is scheduled for Monday, May 5, 2025, with a conference call scheduled on Tuesday, April 29, 2025 at 10:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Cementos Pacasmayo S.A.A. Q2 2023 Earnings Call TranscriptProvided by QuartrJuly 21, 2023 ShareLink copied to clipboard.There are 4 speakers on the call. Operator00:00:00Good day, ladies and gentlemen. Welcome to Bacas Mayo's Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. And please note that this call is being recorded. At the conclusion of our prepared remarks, we will conduct a question and answer session. Operator00:00:20I would now like to introduce your host for today's call, Mrs. Claudia Bustamante, Sustainability and Investor Relations Manager. Mrs. Bustamante, you may begin. Speaker 100:00:33Thank you, Jenny. Good morning, everyone. Joining me on the call today is Mr. Humberto Nadal, our Chief Officer and Mr. Manuel Ferreiro, our Chief Financial Officer. Speaker 100:00:42Mr. Nadal will begin our call with an overview of the quarter, focusing primarily on our strategic outlook for the short and medium term. Mr. Ferreiro will then follow with additional commentary on our financial results. We'll then turn the call over to your questions. Speaker 100:00:56Please 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 Mr. Humberto Nadal. Speaker 200:01:19Thank you, Claudia. Welcome everyone to today's conference call and thank you for joining us today. This quarter, we experienced some demand side challenges as heavy rain during March April caused a decrease in demand. Since May, we have seen a consistent decrease in our cement daily shipments, which gives us the confidence to believe that the second half of the year should be much stronger in terms of demand. It is also important to note that even though revenues were down 12.1% in the Q2 when compared to the Q2 of last year, EBITDA margin reached 25.5%, an increase of 1.5 percentage points year over year. Speaker 200:01:57This is a very clear indicator of how we are maximizing profitability by striving for efficiencies in this complex demand environment. I would like now to focus on a remarkable event that happened this quarter. As I mentioned before, last year we launched the COSACO, a new technology that allows the cement bag to disintegrate completely within the concrete mix achieving 0 waste. This is significant innovation in a country like Peru where most cement is still sold in bags, but it is also a challenging one. Most foremen have learned how to build empirically through experience that is passed on from generation to generation. Speaker 200:02:33Innovating in this context is indeed difficult. Moreover, many of these families put their life savings in these houses. They need to be absolutely confident that the quality properties and the final product will not be affected at all by this new technique. And this is precisely why a strong marketing campaign is so important. The Cosaco Innovation obtained the Grand EFI this quarter as well as a gold EFI in the innovation and product marketing category and a silver EFI in the positive change in environment category. Speaker 200:03:03The EFI awards are a symbol of outstanding achievement recognized worldwide that honor all types of effective marketing. It is truly remarkable that a cement company with original scope such as Pacasmayo obtained the greatest price, so it is usually awarded to companies with a national presence and in the mass consumption segment. We are indeed very proud of this outstanding achievement, especially because the product truly represents our DNA. The effective marketing of this innovation is key to the achievement of its full potential as a 0 waste product as well as to the gradual change in consumers' mindset towards eco fender and more sustainable products. As we have mentioned before, we have been producing cement with a lower clinker factor for over 25 years. Speaker 200:03:50Pacasmayo's portfolio is mostly made up of blended cements, which have a lower impact on environment since they use less clinker in their production. Currently, over 85% of our cement sales come from blended cement, which have an average of 22% less clinker than original Portland cement, achieving significant savings in CO2 emissions during production. However, we consider that this is not enough. We are voluntarily and I repeat voluntarily committed to a reduction of 20% in our emissions by 2,030, which means we have to decrease our average clinical factor to at least 68% by then at the case of 3.5 percentage points compared to our 2022 average. We continue innovating to find alternative materials that can deliver the same or even better quality cement with an even lower carbon footprint. Speaker 200:04:42After speaking about sustainability, I would like now to focus on our fundamental pillar of our strategic model, digital transformation. This is no doubt a popular term these days, but one has to be at the center of those businesses that truly want to be at the forefront. Changes in purchasing behavior of consumers and open access to digital technologies are catalysts of this new wave of digitalization. These trends create both opportunities and risks as they challenge the status quo. In this changing world with ever more demanding consumers and clear digital transformation strategy that seeks to guide and accelerate the company towards its vision with a focus on collaboration and customer innovation is even more relevant. Speaker 200:05:26And although we have talked about this before, 1 to 3 of us are great milestone for Pacasmayo as we have taken the first step towards becoming a fully data driven organization. We now have a clear strategy for data management. We have a service data and analytics committee to both prioritize and foster initiatives. We have now founded the 1st agile unit within Pacasmayo and we are designing and making available an ecosystem of corporate data to our own data lake. And finally, developing case studies to lead and implement data and analytics solutions that add value to our businesses. Speaker 200:06:04We are aware that we still have a long way to go, but we believe we are now better prepared to face the future and we'll continue to promote flexibility, agility and innovation through our business model and culture to continue along this path. Finally, I would like to briefly update you on the status of our Pacasmayo plant optimization. We are very pleased to inform that the kill number 4 is now operational and wrapping up its production and expect to reach its full capacity during the next couple of weeks. This newer technology will allow us to save 15% in the consumption of kilowatts per hour per tonne of clinker and an estimated reduction of 30% in the consumption of the kilocalories per tonne. We were able to deliver this project on time with an overall investment of $80,000,000 for the original 600,000 metric tons of clinker per year. Speaker 200:06:57I will now turn the call over to Manuel to go into a more detailed financial analysis. Speaker 300:07:05Thank you, Humberto. Good morning, everyone. As Humberto mentioned, our Q2 2023 revenues were affected by the temporary decrease in demand, reaching BRL442 1,000,000, a 12.1% decrease when compared to the same period of last year. Gross profit also decreased, but significantly less, achieving PEN152.6 million, a 3.5 percent decrease when compared to the same period of last year, mainly affected by decreased sales, partially offset by lower costs from decreased use of imported clinker and lower coal costs. Consolidated EBITDA was PEN112.6 million this quarter, a 6.6% decrease when compared to the Q2 of last year. Speaker 300:07:58However, it is important to note that the EBITDA margin was 25.5%, a 1.5 percentage point increase when compared to the Q2 of last year. For the 1st 6 months of the year, results followed a similar trend. Revenues decreased 10.3%, gross profit only 3%, and EBITDA 5.9%, when compared to the same period of 2022. EBITDA margin during this period was 25.3 percent, an improvement of 1.2 percentage points compared to the same period of last year. Turning to operating expenses, administrative expenses for the Q2 of 2023 increased 6.2% compared to the same period of last year and 7.2% during the 1st 6 months of the year when compared to the same period of 2022, mainly due to the increase in wage in line with inflation as well as an increased donation as a result of the cyclone Iaco. Speaker 300:09:08Selling expenses decreased 7.6% in the Q2 of 2023 and 2.4% in the 6 months of 2023 compared to the same period of last year respectively, mainly due to decrease in personnel expenses, basically because of variable salaries in line with decreased sales, as well as a decreased advertising and promotion expenses. Moving on to the different segments, sales of cement decreased 7.4%. This quarter were compared to the same period of last year and 5.8% during the 1st 6 months when compared to the 1st 6 months of 2022. This was mainly due to the temporary decrease in demand because of the flooding and landslides caused by cycling Yako and intense rainfall afterwards. We have started seeing a recovery in sales volume and expect the second half of the year to show this improvement. Speaker 300:10:17However, gross margin increased 2.3 percentage points in the Q2 of 2023 when compared to the Q2 of 2022 and 1.7 percentage points during the 1st 6 months of the year when compared to the same period of last year, mainly due to a reduction in the use of imported tinker and lower cost of coal. During this quarter, concrete payments and mortar sales decreased 30.6% when compared to the same period of last year, mainly due to a significant slowdown in sales volume for private and public works. New regional authorities took office this January and almost immediately had to deal with the cyclone Yaku and its aftermath. So have only recently began to look into investment possibilities. We believe that the second half of the year should bring along more public infrastructure investments, especially considering that preventive works for the predicted El Nino in 2024, which should begin as soon as possible. Speaker 300:11:33Gross margin decreased by 9.5 percentage points in the Q2 of 2023 when compared to the same period of last year, mainly due to lower dilution of fixed costs because of the decrease in sales volume. However, it is important to note that we have worked very hard in streaming our costs and we are certain that once volume improve, we should be able to capitalize our own margins. Results for the 1st 6 months of the year were similar. Revenues decreased 26.5 percent and gross profit decreased 5.5 percentage points when compared to the same period of previous years. Sales of precast materials during the Q2 of 2023 and the 1st 6 months also decreased affected by the low levels of public investment and the heavy rates. Speaker 300:12:32Net profit decreased 9.4% this quarter and 7.2% during the 1st 6 months of the year when compared to the 2nd quarter and the 1st 6 months of last year, respectively, mainly due to temporary decrease in sales. In terms of debt, our net debt to EBITDA ratio was 3.3 times. To summarize, this quarter results show our ability to manage costs and seek for efficiencies during lower demand times. This makes us confident that we will be able to maximize profitability as soon as the market starts recovering. Operator, please can we open to questions? Operator00:13:20No problem. At this time, we are opening the floor up for questions. Speaker 200:14:03Operator, if you have no questions on the floor, we're going to go to the questions on the web. Speaker 100:14:09Yes. Perfect. I'll start with a question from Francisco Suarez. Congrats for advancing in your production integration, namely improving clinker capacity. Two questions. Speaker 100:14:23The first one, any plans to add a new grinding unit in your Pacasmayo plant to reduce further kilowatt hour per ton? And the second one, what can you tell us on spending related to reconstruction efforts in Northern Peru and the creation of resilient infrastructure to cope for more climate volatility in the future? Speaker 200:14:49Thank you, Francisco, for your comments and on your two questions. We have no intentions of adding capacity. As a matter of fact, we have more than enough. As you well know, I mean, we always run a lower clinker factor. So usually our grinding capacity is ahead of our clinker capacity. Speaker 200:15:06At this point, as a company, we can dispatch over 5,000,000 tons. And the 2 grinding facilities, which is grind number 6 and number 7 in Pacasmayo, they were built around 2,009, 2010, so pretty modern. So the question the answer is no. And the second question? Infrastructure, yes. Speaker 200:15:28Yesterday President Volvarte signed officially the creation of the National Authority for Infrastructure, which is I think a huge step in the right direction. This is a very interesting position because he will not be politically appointed. It has a lot to do with long term vision. So I'm sure with that and with all the things that we are seeing over the last 3, 4 weeks of the authorities preparing for El Nino, we are very confident that the 2nd semester will we show better numbers in terms of volumes. As a matter of fact, if you see our daily sales, we've been we have seen a consistent improvement over the last 3 or 4 weeks, and I think this will be reinforced by the spending of the local and national authorities in the coming months. Speaker 100:16:15The next question is about from Gerald Ford from Intera. How much is the cost of coal in as a percentage of your own clinker? Speaker 300:16:29The percentage of the cost of coal, it's approximately 14%. Speaker 100:16:38And then regarding the EcoSaco, is there any difference between the gross margin of this product with other products? And also what's the share of the EcoSaco within our Speaker 300:16:49No, basically there is no additional cost. Well, additional cost is minimum because the only difference is the cost of the bag. So it's basically the same Speaker 200:17:03cement. Speaker 100:17:09And then the next question comes from Marcelo Borlan. Three questions. So first, Pacasmayo has disbursed PEN160 1,000,000 in the first half, which is well above historical levels. Could you guys give me more color regarding the main investments the company has made so far in 2023 justify the increase? Speaker 200:17:32Yes. I think the fundamental is, I mean, clip number 4, like I said in my speech, we spent around $80,000,000 to put it into production. And this is an extraordinary CapEx event. After that, I mean, we have no nothing in the horizon except the normal sustaining CapEx. Speaker 100:17:52Good question. After the full ramp up of kiln number 4, what can be expected to be sustainable margins in the medium to long term? Speaker 300:18:02The sustainable EBITDA margin in the medium term should be around between 26% 27%. Sorry, but it will depend on how much How much ready mix. How much ready mix we sell. If the ready mix increases, obviously, the margin goes out. But at the absolute EBITDA that we've made goes up. Speaker 100:18:32And then finally, we expect that NIM to affect the country by the end of the year. So could we expect better cement demand in the Q3 as a result of preventive public and private investments? Speaker 200:18:45Absolutely. I mean, we've already seen that over the last weeks. Regional government is trying to get up to par with the Nino preventive measures. So yes, I think where Nino happens or not is something we don't know we're not clear at this moment or the strength of it, we're not clear, but we are seeing a lot of investment in terms of preventive works. Speaker 100:19:09Short term debt seems high for this year. Cash in hand doesn't seem enough. Please could you explain a little more about how are you going to overcome it? Speaker 300:19:20Yes. Basically, the short term that we've acquired has been for the Pacasmayo in Newquil, but this is a very small amount. It's only PEN 100 and something million. And we should prepay it during the next 6 months. Speaker 100:19:43That's all the questions we have from the webcast. So I'll hand it over to Humberto for closing remarks. Speaker 200:19:48Thank you, Claudia. Pacasmayo has been operating in Peru for over 65 years. And throughout this time, we have seen demand periodically fluctuate affecting our short term financial results. However, our strategic model allows us to be ready to take on the market when conditions improve, focusing on those things that generate long term value. We strongly believe the successful adoption of digital transformation and a culture of innovation and sustainability are those drivers that will lead us towards sustained value generation. Speaker 200:20:18The success of these measures is highly reliant on people's compromise and active participation and we are absolutely confident that we have the best talent to achieve it. I would like to thank everybody for the renewed interest in our company. And as always Manuel, Claudio and myself we remain here should we have any further questions. Thank you very much and have a great weekend. Operator00:20:41Thank you, everybody. This does conclude today's conference. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallCementos Pacasmayo S.A.A. Q2 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K) Cementos Pacasmayo S.A.A. Earnings HeadlinesCementos Pacasmayo S.A.A. American Depositary Shares (Each representing five Common Shares) (CPAC)April 11, 2025 | nasdaq.comCementos Pacasmayo May Offer An Adjusted 13% Earnings Yield, But Is Fairly ValuedFebruary 18, 2025 | seekingalpha.comTrump purposefully forcing markets to crash…Whether you agree with the plan or not doesn’t matter. It’s happening. The only question is – are you ready for it?April 22, 2025 | Porter & Company (Ad)Cementos Pacasmayo price target lowered to $6 from $6.50 at JPMorganFebruary 17, 2025 | markets.businessinsider.comCEMENTOS PACASMAYO S.A.A. R.U.C. N° 20419387658: Notice of Mandatory Annual Shareholders' MeetingFebruary 14, 2025 | finance.yahoo.comCementos Pacasmayo projects sustained EBITDA margins at 27% in 2025 amid volume growthFebruary 14, 2025 | msn.comSee More Cementos Pacasmayo S.A.A. Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Cementos Pacasmayo S.A.A.? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Cementos Pacasmayo S.A.A. and other key companies, straight to your email. Email Address About Cementos Pacasmayo S.A.A.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.View Cementos Pacasmayo S.A.A. 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There are 4 speakers on the call. Operator00:00:00Good day, ladies and gentlemen. Welcome to Bacas Mayo's Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. And please note that this call is being recorded. At the conclusion of our prepared remarks, we will conduct a question and answer session. Operator00:00:20I would now like to introduce your host for today's call, Mrs. Claudia Bustamante, Sustainability and Investor Relations Manager. Mrs. Bustamante, you may begin. Speaker 100:00:33Thank you, Jenny. Good morning, everyone. Joining me on the call today is Mr. Humberto Nadal, our Chief Officer and Mr. Manuel Ferreiro, our Chief Financial Officer. Speaker 100:00:42Mr. Nadal will begin our call with an overview of the quarter, focusing primarily on our strategic outlook for the short and medium term. Mr. Ferreiro will then follow with additional commentary on our financial results. We'll then turn the call over to your questions. Speaker 100:00:56Please 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 Mr. Humberto Nadal. Speaker 200:01:19Thank you, Claudia. Welcome everyone to today's conference call and thank you for joining us today. This quarter, we experienced some demand side challenges as heavy rain during March April caused a decrease in demand. Since May, we have seen a consistent decrease in our cement daily shipments, which gives us the confidence to believe that the second half of the year should be much stronger in terms of demand. It is also important to note that even though revenues were down 12.1% in the Q2 when compared to the Q2 of last year, EBITDA margin reached 25.5%, an increase of 1.5 percentage points year over year. Speaker 200:01:57This is a very clear indicator of how we are maximizing profitability by striving for efficiencies in this complex demand environment. I would like now to focus on a remarkable event that happened this quarter. As I mentioned before, last year we launched the COSACO, a new technology that allows the cement bag to disintegrate completely within the concrete mix achieving 0 waste. This is significant innovation in a country like Peru where most cement is still sold in bags, but it is also a challenging one. Most foremen have learned how to build empirically through experience that is passed on from generation to generation. Speaker 200:02:33Innovating in this context is indeed difficult. Moreover, many of these families put their life savings in these houses. They need to be absolutely confident that the quality properties and the final product will not be affected at all by this new technique. And this is precisely why a strong marketing campaign is so important. The Cosaco Innovation obtained the Grand EFI this quarter as well as a gold EFI in the innovation and product marketing category and a silver EFI in the positive change in environment category. Speaker 200:03:03The EFI awards are a symbol of outstanding achievement recognized worldwide that honor all types of effective marketing. It is truly remarkable that a cement company with original scope such as Pacasmayo obtained the greatest price, so it is usually awarded to companies with a national presence and in the mass consumption segment. We are indeed very proud of this outstanding achievement, especially because the product truly represents our DNA. The effective marketing of this innovation is key to the achievement of its full potential as a 0 waste product as well as to the gradual change in consumers' mindset towards eco fender and more sustainable products. As we have mentioned before, we have been producing cement with a lower clinker factor for over 25 years. Speaker 200:03:50Pacasmayo's portfolio is mostly made up of blended cements, which have a lower impact on environment since they use less clinker in their production. Currently, over 85% of our cement sales come from blended cement, which have an average of 22% less clinker than original Portland cement, achieving significant savings in CO2 emissions during production. However, we consider that this is not enough. We are voluntarily and I repeat voluntarily committed to a reduction of 20% in our emissions by 2,030, which means we have to decrease our average clinical factor to at least 68% by then at the case of 3.5 percentage points compared to our 2022 average. We continue innovating to find alternative materials that can deliver the same or even better quality cement with an even lower carbon footprint. Speaker 200:04:42After speaking about sustainability, I would like now to focus on our fundamental pillar of our strategic model, digital transformation. This is no doubt a popular term these days, but one has to be at the center of those businesses that truly want to be at the forefront. Changes in purchasing behavior of consumers and open access to digital technologies are catalysts of this new wave of digitalization. These trends create both opportunities and risks as they challenge the status quo. In this changing world with ever more demanding consumers and clear digital transformation strategy that seeks to guide and accelerate the company towards its vision with a focus on collaboration and customer innovation is even more relevant. Speaker 200:05:26And although we have talked about this before, 1 to 3 of us are great milestone for Pacasmayo as we have taken the first step towards becoming a fully data driven organization. We now have a clear strategy for data management. We have a service data and analytics committee to both prioritize and foster initiatives. We have now founded the 1st agile unit within Pacasmayo and we are designing and making available an ecosystem of corporate data to our own data lake. And finally, developing case studies to lead and implement data and analytics solutions that add value to our businesses. Speaker 200:06:04We are aware that we still have a long way to go, but we believe we are now better prepared to face the future and we'll continue to promote flexibility, agility and innovation through our business model and culture to continue along this path. Finally, I would like to briefly update you on the status of our Pacasmayo plant optimization. We are very pleased to inform that the kill number 4 is now operational and wrapping up its production and expect to reach its full capacity during the next couple of weeks. This newer technology will allow us to save 15% in the consumption of kilowatts per hour per tonne of clinker and an estimated reduction of 30% in the consumption of the kilocalories per tonne. We were able to deliver this project on time with an overall investment of $80,000,000 for the original 600,000 metric tons of clinker per year. Speaker 200:06:57I will now turn the call over to Manuel to go into a more detailed financial analysis. Speaker 300:07:05Thank you, Humberto. Good morning, everyone. As Humberto mentioned, our Q2 2023 revenues were affected by the temporary decrease in demand, reaching BRL442 1,000,000, a 12.1% decrease when compared to the same period of last year. Gross profit also decreased, but significantly less, achieving PEN152.6 million, a 3.5 percent decrease when compared to the same period of last year, mainly affected by decreased sales, partially offset by lower costs from decreased use of imported clinker and lower coal costs. Consolidated EBITDA was PEN112.6 million this quarter, a 6.6% decrease when compared to the Q2 of last year. Speaker 300:07:58However, it is important to note that the EBITDA margin was 25.5%, a 1.5 percentage point increase when compared to the Q2 of last year. For the 1st 6 months of the year, results followed a similar trend. Revenues decreased 10.3%, gross profit only 3%, and EBITDA 5.9%, when compared to the same period of 2022. EBITDA margin during this period was 25.3 percent, an improvement of 1.2 percentage points compared to the same period of last year. Turning to operating expenses, administrative expenses for the Q2 of 2023 increased 6.2% compared to the same period of last year and 7.2% during the 1st 6 months of the year when compared to the same period of 2022, mainly due to the increase in wage in line with inflation as well as an increased donation as a result of the cyclone Iaco. Speaker 300:09:08Selling expenses decreased 7.6% in the Q2 of 2023 and 2.4% in the 6 months of 2023 compared to the same period of last year respectively, mainly due to decrease in personnel expenses, basically because of variable salaries in line with decreased sales, as well as a decreased advertising and promotion expenses. Moving on to the different segments, sales of cement decreased 7.4%. This quarter were compared to the same period of last year and 5.8% during the 1st 6 months when compared to the 1st 6 months of 2022. This was mainly due to the temporary decrease in demand because of the flooding and landslides caused by cycling Yako and intense rainfall afterwards. We have started seeing a recovery in sales volume and expect the second half of the year to show this improvement. Speaker 300:10:17However, gross margin increased 2.3 percentage points in the Q2 of 2023 when compared to the Q2 of 2022 and 1.7 percentage points during the 1st 6 months of the year when compared to the same period of last year, mainly due to a reduction in the use of imported tinker and lower cost of coal. During this quarter, concrete payments and mortar sales decreased 30.6% when compared to the same period of last year, mainly due to a significant slowdown in sales volume for private and public works. New regional authorities took office this January and almost immediately had to deal with the cyclone Yaku and its aftermath. So have only recently began to look into investment possibilities. We believe that the second half of the year should bring along more public infrastructure investments, especially considering that preventive works for the predicted El Nino in 2024, which should begin as soon as possible. Speaker 300:11:33Gross margin decreased by 9.5 percentage points in the Q2 of 2023 when compared to the same period of last year, mainly due to lower dilution of fixed costs because of the decrease in sales volume. However, it is important to note that we have worked very hard in streaming our costs and we are certain that once volume improve, we should be able to capitalize our own margins. Results for the 1st 6 months of the year were similar. Revenues decreased 26.5 percent and gross profit decreased 5.5 percentage points when compared to the same period of previous years. Sales of precast materials during the Q2 of 2023 and the 1st 6 months also decreased affected by the low levels of public investment and the heavy rates. Speaker 300:12:32Net profit decreased 9.4% this quarter and 7.2% during the 1st 6 months of the year when compared to the 2nd quarter and the 1st 6 months of last year, respectively, mainly due to temporary decrease in sales. In terms of debt, our net debt to EBITDA ratio was 3.3 times. To summarize, this quarter results show our ability to manage costs and seek for efficiencies during lower demand times. This makes us confident that we will be able to maximize profitability as soon as the market starts recovering. Operator, please can we open to questions? Operator00:13:20No problem. At this time, we are opening the floor up for questions. Speaker 200:14:03Operator, if you have no questions on the floor, we're going to go to the questions on the web. Speaker 100:14:09Yes. Perfect. I'll start with a question from Francisco Suarez. Congrats for advancing in your production integration, namely improving clinker capacity. Two questions. Speaker 100:14:23The first one, any plans to add a new grinding unit in your Pacasmayo plant to reduce further kilowatt hour per ton? And the second one, what can you tell us on spending related to reconstruction efforts in Northern Peru and the creation of resilient infrastructure to cope for more climate volatility in the future? Speaker 200:14:49Thank you, Francisco, for your comments and on your two questions. We have no intentions of adding capacity. As a matter of fact, we have more than enough. As you well know, I mean, we always run a lower clinker factor. So usually our grinding capacity is ahead of our clinker capacity. Speaker 200:15:06At this point, as a company, we can dispatch over 5,000,000 tons. And the 2 grinding facilities, which is grind number 6 and number 7 in Pacasmayo, they were built around 2,009, 2010, so pretty modern. So the question the answer is no. And the second question? Infrastructure, yes. Speaker 200:15:28Yesterday President Volvarte signed officially the creation of the National Authority for Infrastructure, which is I think a huge step in the right direction. This is a very interesting position because he will not be politically appointed. It has a lot to do with long term vision. So I'm sure with that and with all the things that we are seeing over the last 3, 4 weeks of the authorities preparing for El Nino, we are very confident that the 2nd semester will we show better numbers in terms of volumes. As a matter of fact, if you see our daily sales, we've been we have seen a consistent improvement over the last 3 or 4 weeks, and I think this will be reinforced by the spending of the local and national authorities in the coming months. Speaker 100:16:15The next question is about from Gerald Ford from Intera. How much is the cost of coal in as a percentage of your own clinker? Speaker 300:16:29The percentage of the cost of coal, it's approximately 14%. Speaker 100:16:38And then regarding the EcoSaco, is there any difference between the gross margin of this product with other products? And also what's the share of the EcoSaco within our Speaker 300:16:49No, basically there is no additional cost. Well, additional cost is minimum because the only difference is the cost of the bag. So it's basically the same Speaker 200:17:03cement. Speaker 100:17:09And then the next question comes from Marcelo Borlan. Three questions. So first, Pacasmayo has disbursed PEN160 1,000,000 in the first half, which is well above historical levels. Could you guys give me more color regarding the main investments the company has made so far in 2023 justify the increase? Speaker 200:17:32Yes. I think the fundamental is, I mean, clip number 4, like I said in my speech, we spent around $80,000,000 to put it into production. And this is an extraordinary CapEx event. After that, I mean, we have no nothing in the horizon except the normal sustaining CapEx. Speaker 100:17:52Good question. After the full ramp up of kiln number 4, what can be expected to be sustainable margins in the medium to long term? Speaker 300:18:02The sustainable EBITDA margin in the medium term should be around between 26% 27%. Sorry, but it will depend on how much How much ready mix. How much ready mix we sell. If the ready mix increases, obviously, the margin goes out. But at the absolute EBITDA that we've made goes up. Speaker 100:18:32And then finally, we expect that NIM to affect the country by the end of the year. So could we expect better cement demand in the Q3 as a result of preventive public and private investments? Speaker 200:18:45Absolutely. I mean, we've already seen that over the last weeks. Regional government is trying to get up to par with the Nino preventive measures. So yes, I think where Nino happens or not is something we don't know we're not clear at this moment or the strength of it, we're not clear, but we are seeing a lot of investment in terms of preventive works. Speaker 100:19:09Short term debt seems high for this year. Cash in hand doesn't seem enough. Please could you explain a little more about how are you going to overcome it? Speaker 300:19:20Yes. Basically, the short term that we've acquired has been for the Pacasmayo in Newquil, but this is a very small amount. It's only PEN 100 and something million. And we should prepay it during the next 6 months. Speaker 100:19:43That's all the questions we have from the webcast. So I'll hand it over to Humberto for closing remarks. Speaker 200:19:48Thank you, Claudia. Pacasmayo has been operating in Peru for over 65 years. And throughout this time, we have seen demand periodically fluctuate affecting our short term financial results. However, our strategic model allows us to be ready to take on the market when conditions improve, focusing on those things that generate long term value. We strongly believe the successful adoption of digital transformation and a culture of innovation and sustainability are those drivers that will lead us towards sustained value generation. Speaker 200:20:18The success of these measures is highly reliant on people's compromise and active participation and we are absolutely confident that we have the best talent to achieve it. I would like to thank everybody for the renewed interest in our company. And as always Manuel, Claudio and myself we remain here should we have any further questions. Thank you very much and have a great weekend. Operator00:20:41Thank you, everybody. This does conclude today's conference. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.Read morePowered by