NYSE:CPAC Cementos Pacasmayo S.A.A. Q4 2024 Earnings Report $5.65 +0.18 (+3.29%) As of 03:54 PM Eastern Earnings HistoryForecast Cementos Pacasmayo S.A.A. EPS ResultsActual EPS$0.15Consensus EPS $0.18Beat/MissMissed by -$0.03One Year Ago EPSN/ACementos Pacasmayo S.A.A. Revenue ResultsActual Revenue$140.30 millionExpected Revenue$141.04 millionBeat/MissMissed by -$740.00 thousandYoY Revenue GrowthN/ACementos Pacasmayo S.A.A. Announcement DetailsQuarterQ4 2024Date2/13/2025TimeBefore Market OpensConference Call DateFriday, February 14, 2025Conference Call Time9:00AM 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 10:30 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (6-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Cementos Pacasmayo S.A.A. Q4 2024 Earnings Call TranscriptProvided by QuartrFebruary 14, 2025 ShareLink copied to clipboard.There are 7 speakers on the call. Operator00:00:00Good day, ladies and gentlemen. Welcome to Pacasmayo's Fourth Quarter twenty twenty four 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. Operator00:00:16I would now like to introduce your host for today's call, Ms. Claudia Bustamante, Investor Relations Manager. Ms. Bustamante, you may begin. Speaker 100:00:26Thank you, Luis. Good morning, everyone. Joining me on the call today is Mr. Humberto Nadal, our Chief Executive Officer Mr. Manuel Ferreiro, our Chief Financial Officer and Elie Hayashi, our Finance Managing Director. Speaker 100:00:40Mr. 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, who will then follow with additional commentary on our financial results, will then turn the call over to your questions. Please note that this call will include certain forward looking statements. Speaker 100:00:59These 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 Marc. Speaker 200:01:22Thank you, Claudia. Welcome, everyone, to today's conference call, and thank you for joining us today. Before beginning the analysis of this quarter's results, I would like to take a few minutes to talk about the recent announcement of Manuel Ferreiro's retirement as CFO. As most of you already know, at the end of last year, we announced that Manuel will be stepping down as CFO effective March 31 after an impeccable career that led him to be considered several times as one of the best CFOs in our industry in Latin America. His retirement succession plan carefully drawn up more than three years ago. Speaker 200:01:57In EP2025, a new chapter will begin for the company and the leadership of Ms. Eli Hayashi, who will maintain Manuel's legacy and learnings leading Pacasmayo to be better every day. Now moving on to our results. This quarter, we saw a reversal of the negative trend in sales volume, resulting in an increase of 2.6% year over year. This increase was mainly due to increased sales to the public sector and concrete and pavement for the Pura Airport project. Speaker 200:02:24For whole year 2024, revenues increased 1.4% despite a slight decrease in sales volumes, mainly due to sales mix and our dynamic pricing strategy. Moreover, consolidated EBITDA reached a record $549,300,000 with an EBITDA margin of 27.8%. These results considering a challenging demand environment are outstanding and give us the confidence to believe that with a stronger demand scenario in 2025, we will be able to deliver even better results. I would now like to highlight the progress in 2024 of some key elements of our strategy. As we are all aware, the world is transforming fast. Speaker 200:03:05The understanding and use of new technologies such as AI and machine learning and immense power of data are accelerating the pace of change. As a company, we are focusing on both developing and adopting digital tools and reinforcing the culture to adopt them. Throughout 2024, we made significant strides in digital transformation, aligning technology with our strategic objectives to enhance efficiency and innovation. We developed initiatives focused on the digitalization of operations, introduced a user centered service model to improve customer interactions and AI driven solutions play a growing role in the company's evolution. Additionally, data management and automation played an increasingly crucial role in optimizing supply chain efficiency, modernizing logistic processes, streamlining operations and reinforcing our commitment to continuous improvement. Speaker 200:03:59However, all of these technology adoption and data reliance brings its own challenges. Cybersecurity is paramount in the process of digital transformation. During 2024, we focused our efforts on strengthening the protection of operational technologies by increasing the maturity of industrial network. We also consolidated information security committee composed of representatives on various management positions to ensure a comprehensive approach to digital bridge management. These efforts culminated in a major milestone as we became the first Peruvian cement company to obtain an ISO 27,001 certification, the international asset allocation and the confidentiality and integrity of information. Speaker 200:04:42Another important pillar of our strategy is to continue to develop and strengthen our building solutions. During 2024, we have two significant projects towards this goal. First, we designed an innovative solution for riverbank protection that are traditionally done with steel and rocks. But in their parts of the North where rocks are not readily available, we signed a new solution using mainly cement, local materials and mortar is both more cost effective and more durable. Secondly, we executed the reconstruction of the two runways and the perimeter fence of the Pure Airport, not only as a concrete and pavement provider, but directly involved in the construction as part of the construction. Speaker 200:05:25The way in which we approach this project is different from other airport improvement projects we have provided concrete for in the past. Since in this case, we actively participated in every step, beginning with the prospects and ending with actual delivery of the finished infrastructure project. This involvement in every step of the process has brought invaluable insights and learning opportunities, albeit at some additional costs. We remain really confident that value added building solutions are a wrap forward for our company, and we will continue learning, adjusting and improving in this journey. Finally, I would like to briefly mention some advancement and recommendations in terms of sustainability. Speaker 200:06:06We are extremely pleased to be the first Peruvian cement company to obtain an environmental forest decoration from the global EPD program for three of our cement plants, representing an estimated 75% of our current portfolio. Verified by INO, this international certification provides full transparency on the environmental impact of our products throughout the lifecycle, reaffirming once more our leadership in sustainability and our commitment to responsible construction. In addition, we are honored to have been included for the fifth consecutive year in the sustainability effort by S and P and have maintained our position as industry leaders in the Merck Responsibility ESG ranking for the ninth year in a row. This evaluation, which considers environmental impact, social responsibility, ethics and corporate governance, places us in the top 10 more responsible companies in the country. These recognitions reinforce our dedication to sustainability and drive us to continue embedding it at the core of our business strategy. Speaker 200:07:12I will now turn the call over to Manuel to go Speaker 300:07:14to financial finance. Thank you, Humberto. Good morning, everyone. This quarter revenues increased 3% compared to the same period of 2023, reaching $526,700,000 During this same period, the gross profit decreased 2.1% when compared to the same period of previous year, mainly due to higher costs related to the execution of the fuel airport project. Consolidated EBITDA was $142,500,000 this quarter, and the EBITDA margin was 27.18.7% and a 3.4 percentage point decrease, respectively, when compared to the adjusted EBITDA and a nineteen point two percent and three point seven percentage point increase, respectively, when compared to a consolidated EBITDA of the same period of 2023. Speaker 300:08:13For the whole year of 2023, revenues increased 1.4%, consolidated EBITDA increased 14% and the EBITDA margin also increased 3.3 percentage points when compared to the same period of last year. These positive results, as Humberto mentioned, are the outcome of a smart pricing strategy and a solid operating efficiencies. Due to the operating expenses, administrative expenses for the fourth quarter of twenty twenty four increased 169.2% in 2024 when compared to the same period of the previous year, respectively, mainly due to increased personnel expenses because of a larger workforce as well as a higher workers profit sharing and third party services related to renewal fees for mining concession, software and licenses among others. Selling expenses during this quarter increased 34.817% in the 2024 compared to the fourth quarter and 2023, respectively, mainly due to the increase in personnel expenses because of a larger worker force as well as a higher workers' profit sharing, advertising and promotion as well as software and licenses. Moving on to the different segments. Speaker 300:09:39Sales of cement increased 1.8% this quarter when compared to the same period of 2023, mainly due to an increase in average prices. The gross profit of this period also increased 1.9% and the gross margin remained flat when compared to the fourth quarter of twenty twenty three. For the whole year of 2024, sales of cement decreased 2.2% when compared to the whole year 2023, mainly due to a decrease in demand from the self construction segment. Nonetheless, due to our continued focus on efficiencies, the gross profit increased 7.6% and the gross margin increased 4.1 percentage points in 2024 when compared to 2023 mainly due to cost optimization. During this quarter, concrete payments and mortar sales increased 30.948.8% for the whole year 2024 when compared to the same period of 2023, mainly due to increased sales volume of payment for the Pura Airport project, Amaladols. Speaker 300:10:54Gross margin decreased during this quarter and the whole year mainly due to increased costs related to execution of the Pura project, Tura Airport project. There is a difference in exchange rate between the rate projected in the contract versus the real exchange rate as well as additional costs incurred because of the extension of the project beyond our planned execution period. As Humberto mentioned before, we remain confident that developing a new solution is the right path for our company, even if it entailed some additional costs in the short term. Regarding precast materials sales and gross margin for the fourth quarter twenty twenty four were mostly in line with the fourth quarter of twenty twenty three. During 2024, pre cash sales increased 18% compared to twenty twenty four twenty twenty three, mainly due to increased demand from the public sector. Speaker 300:12:01Moreover, gross margin increased 10.7 percentage points when compared to 2023, mainly due to the dilution of fixed costs because of this higher sales volume. Moving back to our consolidated result, the net profit increased 39.3% this quarter and 17.8% for the whole year when compared to the same period of last year, respectively, mainly due to increased operating profit as mentioned before as well as to the impairment loss of our vertical teams included in the twenty twenty three results. Finally, in terms of debt, our net debt to EBITDA ratio was 2.7 times below the level obtained the previous quarter as we continue deleveraging. As Humberto mentioned, I have decided to step down as CFO as of March 31. Pacasmayo has been my home for the past seventeen years as we surely miss it. Speaker 300:13:13But it is time for the next generation to step forward as the greatest legacy we can leave is a team of well prepared and talented individuals. Kelly Hayashi has worked for Pacasmagio for the last twenty years since her internship, and I have worked closely with her for last past five years. I am confident that she is more than ready to take off the challenge. I want to thank each and every one of you for your trust in me as CFO and in our company throughout this time. Operator, can we please now open the floor for questions? Operator00:13:59Thank you. So we'll now move to the question and answer Okay. Our first question comes from Marcelo Ferland from Itau. Please go ahead. Speaker 400:14:25Hi, everyone. Can you hear me? Yes, please go ahead. Okay. Thank you guys for taking my questions. Speaker 400:14:32So I have a couple of questions here. The first is related to sales volumes for 2025. I mean, when we see the volumes in this 4Q, it grows by 2% year over year. And actually, when you compare the second half, sales volumes in 2024, it increased by 14% versus the first half of last year. So on top of that, I'd like to have more color of what are you guys expecting for sales volumes in 2025? Speaker 400:14:59This is my first question. The second question is if you guys could please give a little bit more detail regarding the higher cost and expenses that you guys have in the fourth Q, this would help as well. And finally, my third question is related to capital allocation ahead. So what are guys forecasting for CapEx in 2025? And also what are you guys forecasting for maybe raising shareholders return and so on and so forth? Speaker 400:15:26So that's pretty much it. Thank you. Speaker 200:15:29Sure. As we mentioned, I mean, the last quarter we saw for the first time in 2024 an increase compared year to year. So we believe the volumes should show a positive trend on 2025, probably on the same positive numbers that we saw on the last quarter of twenty twenty four. Regarding the CapEx question you had, our sustaining CapEx remains at $100,000,000 more or less. We don't see any additional CapEx in this coming year or year 2026. Speaker 200:16:03I think we are well prepared to deliver all the demand that will be showing up. And in terms of higher costs and expenses, I mean, I think I would like to drive your attention, Matt, to in the end, we finished EBITDA margin at a level, which we think is very good. But more than good and competitive, it's very sustainable. Of course, we have had some increased cost in terms of we have more personnel, the company is growing and everything. We also have some increased cost because of profits are in companies that's according to the law. Speaker 200:16:37But in the end, the way you have to see, look at it is, I mean, I think EBITDA margin, which we closed the year, is the one that we should be sustained towards the future. Speaker 400:16:48Okay. Thank you so much, guys. Operator00:16:55Okay. Thank you. Our next question comes from Adrian Huerta from JPMorgan. Please go ahead. Speaker 500:17:05Thank you. Hi, Umberto and Manuel. And Manuel, best wishes on whatever you do. It was Operator00:17:11a privilege to work with Speaker 500:17:12you all these years, Manuel. My question is on just on energy cost. You can just tell us how your energy cost per ton behave during 2024 and what we could expect for this year, Humberto? Speaker 300:17:32Energy cost, hello, again, thank you. Energy cost 2024 has gone down compared with 2023 and we expect should be flat for 2025. Speaker 500:17:44And just remind me what are the main Speaker 300:17:49fuels that you use? For the kilns, we use coal, antracite coal, local coal. And basically for the mills, we use electricity. Speaker 500:18:06And you have fixed cost on that coal? Speaker 300:18:11No, in coal we buy local coal. And basically, I would say it's quite steady the price. We don't have a contract, we buy on spot. But we are a main buyer in Peru. So basically, I would say it's quite steady with price. Speaker 300:18:30And for electricity, yes, we have a long term contract. Speaker 500:18:34Perfect. And just follow-up on the previous question cement volumes for this year. Can you elaborate just a little further on those positive trends that we saw in 4Q that could continue into this year? By segment, how do you see the different segments, residential, nonresidential, infrastructure? How do you see and which should be the main drivers for this year for volumes? Speaker 200:18:59Sure, Adria. I'm going to answer the question on volumes from a different angle than the segments you're asking me. I mean, for us, since 80% of our sales go to self construction, the key proxy for us is employment. People have to be fully employed. We just closed last year our agriculture exports at a record level, dollars 12,000,000,000. Speaker 200:19:20That means, I mean, lots of thousands of people employed, very well employed and actually well paid. That's why this year has begun so strongly and that's why the aid of last year was so strong. Fishing also had a fantastic first season of the year. So all these things convey a potential residential demand that should be absolutely positive side compared to last year. Second, we have just a new Minister of Economics appointed two weeks ago. Speaker 200:19:47Even though he's not a space engineer in economics, he comes from a long and a very successful career in building infrastructure. So I think we already see that he has come in very strong in terms of unlocking some projects. So I think also from infrastructure level, we're going to see the central and regional government spending much more. So as we stand, we closed last year at a very high note in terms of volumes. This year has opened in similar tones and all these things just make us feel very optimistic about volumes. Operator00:20:32Our next question is from Marianne Gonye from Why has the number of employees increased? Is it due to a specific project? Speaker 200:20:45Yes. I mean, when we talk about the internal numbers, I mean, it has to do a lot with specific projects. Sometimes, I mean, like we do the Pura project, so we hire a bunch of people, but the other project will be out. It has to do with that. I mean, in the ready mix business, depending on the project, now we have the Chavimostik irrigation, we have the Yanacocha project. Speaker 200:21:06Those things are really temporary and growing in increasing terms of increasing people that are going to stay for good. That's still increasing but probably at a level of maybe 10 or 15 people a year, not a lot. Operator00:21:26Okay. Thank you. We have a question from Francisco Suarez from Scotiabank. Please go ahead, Francisco. Speaker 600:21:37Thank you so much. Good morning, gents, and congrats on the results. And Manuel, on a personal note, thank you for all your wonderful effort. It was quite a ride, and thank you so much for everything. Best wishes as well. Speaker 600:21:51The question I have is relates with overall utilization on I mean, you have reached levels that usually in the future may lead to a downward trend. Are you still optimistic on your overall utilization rates on your cement operations? And the second question that I have is, if you can walk me a little bit through what are the structural features that make you think so bullish on your ability to maintain the current margins? Thank you. Speaker 200:22:29Thank you, Francisco. I mean, I think right now, we're in terms of clinical at 70% utilization capacity. We are very confident we're okay with that. Also, we have to bear in mind, we keep lowering our clinker factor probably in the next couple of years. We should be somewhere around 67%, sixty eight % as we are increasing capacity. Speaker 200:22:49And in terms of cement utilization mills with regard to 60%. So yes, I think we are not concerned at all about capacity. And in terms of EBITDA margins, I think Adrienne made a very important question before. Energy costs, which are a fundamental part, have been flat over the last two years. If you add to that personnel cost, which go up with inflation, that really allows us to be very confident that the margins should be maintained. Speaker 200:23:15Our pricing policy has been very efficient over the last years. And I think those three factors allow us to think that EBITDA margin is going forward should be maintained. If anything, I mean, if the volumes pick up more than we expect, maybe you should see a little bit of improvement there. Speaker 600:23:33And if I may, and thanks for your complete answer. You rose one thing that touched my attention. Clincare factors, what are the drivers behind improvement? What type of additions are you envisioning in addition to slag? Is any anything happening on that front that explains that such improvement? Speaker 600:23:55Thank you. Speaker 200:23:55Yes. We are mono slag. I mean, we're having focusing heavily in porcelain materials also in raw lime. I think those are the main drivers that are really driving our shrink-wrap so lower. And more than that, Francisco, I mean, we have a single product with 60% clinker factor. Speaker 200:24:15It's a commercial issue. The thing is, I mean, there are some cements that are required by government with a clinker factor of 90%. So we're trying to change the frame of mind of people to understand that other cement to lower critical factor are as good as the ones like the Cement Type one. It's not so much only production. It's also a very strong effort on commercial side to move our portfolio on average to our lower clean Operator00:24:52Okay. Thank you. We'll wait a moment or two for questions to come in. So we have a question from Luis Ramos from La Rangel. Hi, everyone. Operator00:25:18Thanks for taking my questions. First, how vulnerable is this projected recovery on the cement volumes in 2025, particularly considering the increase in security and upcoming elections? Second, could you provide us more color on these costs overruns in the Kyuta Airport? How long will these negative effects last on gross margins? Speaker 200:25:43Thank you for the question. In terms of vulnerability, I don't think the upcoming elections are vulnerability. I do think that increasing security may be a vulnerability because 80% of our market is just construction and we still need to get out to work. So yes, I don't think upcoming elections are an issue. I think in security, it has been there for the last two years. Speaker 200:26:07I don't see it getting any worse than it has been. So I think that's a flat thing. In terms of PURA, first of all, all the cost overruns are already in the results. I mean, there's nothing coming into the future. Everything has gone under the bridge now. Speaker 200:26:22And as we fundamentally, like Manuel mentioned in his speech, exchange rate, we projected exchange rate that didn't happen. Point number two, we had overruns in terms of time. We should have completed the project some months before that we are actually completing it. And this negative effect, like I said, they would have no effect in gross margin in the future. This is a project that's already it's almost done. Speaker 200:26:45So the way we see it is, I mean, this year, we should be our revenues of $500,000,000 coming from Building Solutions. One of the key positioning factors of us has been that we are more than just a commercial segment. And I think some things take a learning curve. I think the peer effort was one of them. But luckily, we're able to deliver the project in the end at a regional cost, but all this has already been taken care of in the 2024 results. Operator00:27:18Okay. Thank you. We had a text question from Gabriel Perez from Credit Corp. He has two questions. I'll start with the first one. Operator00:27:30Could you give us more color on your expectations regarding 2025 in terms of cement deliveries and EBITDA margins? Speaker 200:27:38Yes. I think I've answered that before. I think the color should be the trend of we saw in the last quarter of twenty twenty four is the one that should be going forward. And in terms of EBITDA margins, we should be able to keep the high EBITDA margin we achieved at the end of twenty twenty four. Operator00:27:59Okay. Thank you. And the next question from Gabriel. Given new projects like the Cenas Liberinas, where we should expect higher concrete sales, do you believe gross margin could be lower than 2024? Speaker 200:28:14I think what we're going to expect in terms of concrete sales, I mean, we have a huge Pianacosa project coming in this year. Jarimotchi project should come in towards the end of the year. We see there already mix. And like I mentioned before, and I'll say once more, EBITDA margins should remain at the level we saw at the end of twenty twenty four. Operator00:28:38Okay. Thank you. We are not seeing any more questions. Thank you, everyone, who has sent questions. So perhaps I can hand it back to Mr. Operator00:28:45Humberto Nadal for concluding remarks. Speaker 200:28:48Thank you, everyone, for participating today. And today, indeed, is a special call for all of us here in Pacasmayo for me, especially as my dear friend is joining me for the last time. I would like to close on a more personal note because my military term is in fact, I would say, a very significant milestone for our company. Succession is never easy because it involves people, it involves human feelings, besides the expectations, but it is clearly necessary. It is one of the greatest tests and ultimately the greatest demonstration of our professionals to recognize when it's time to pass the torch and to ensure it is placed in the right hands. Speaker 200:29:27While leadership may change, the essence of this company remains absolutely unchanged, built on the dedication, values and vision that each of us upholds. Manuel has exemplified in a way I've never seen before this period for seventeen extraordinary years, leaving a lasting impact that will guide us over. On behalf of all of us in Pacasmayo and especially on my own behalf, we thank you for your leadership, your integrity, your uplifting spirit and all the lessons you have shown us over these seventeen years. You will always be part of this company's story and we wish you nothing but the very best in this next chapter. We need to meet you very much, my dear friend. Speaker 200:30:07With that in mind, thank you very much, everybody, for joining us today in the call. We close a record year. And hopefully, this year, as we did on 2024, we will be able to get even better results. Thank you so much for your new interest in our corporate. Have a very nice day. Operator00:30:27That concludes the call for today. Thank you and have a nice day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallCementos Pacasmayo S.A.A. Q4 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(6-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.comGet Your Bank Account “Fed Invasion” Ready with THESE 4 Simple StepsStarting as soon as a few months from now, the United States government will make a sweeping change to bank accounts nationwide. It will give them unprecedented powers to control your bank account.April 21, 2025 | Weiss Ratings (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 7 speakers on the call. Operator00:00:00Good day, ladies and gentlemen. Welcome to Pacasmayo's Fourth Quarter twenty twenty four 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. Operator00:00:16I would now like to introduce your host for today's call, Ms. Claudia Bustamante, Investor Relations Manager. Ms. Bustamante, you may begin. Speaker 100:00:26Thank you, Luis. Good morning, everyone. Joining me on the call today is Mr. Humberto Nadal, our Chief Executive Officer Mr. Manuel Ferreiro, our Chief Financial Officer and Elie Hayashi, our Finance Managing Director. Speaker 100:00:40Mr. 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, who will then follow with additional commentary on our financial results, will then turn the call over to your questions. Please note that this call will include certain forward looking statements. Speaker 100:00:59These 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 Marc. Speaker 200:01:22Thank you, Claudia. Welcome, everyone, to today's conference call, and thank you for joining us today. Before beginning the analysis of this quarter's results, I would like to take a few minutes to talk about the recent announcement of Manuel Ferreiro's retirement as CFO. As most of you already know, at the end of last year, we announced that Manuel will be stepping down as CFO effective March 31 after an impeccable career that led him to be considered several times as one of the best CFOs in our industry in Latin America. His retirement succession plan carefully drawn up more than three years ago. Speaker 200:01:57In EP2025, a new chapter will begin for the company and the leadership of Ms. Eli Hayashi, who will maintain Manuel's legacy and learnings leading Pacasmayo to be better every day. Now moving on to our results. This quarter, we saw a reversal of the negative trend in sales volume, resulting in an increase of 2.6% year over year. This increase was mainly due to increased sales to the public sector and concrete and pavement for the Pura Airport project. Speaker 200:02:24For whole year 2024, revenues increased 1.4% despite a slight decrease in sales volumes, mainly due to sales mix and our dynamic pricing strategy. Moreover, consolidated EBITDA reached a record $549,300,000 with an EBITDA margin of 27.8%. These results considering a challenging demand environment are outstanding and give us the confidence to believe that with a stronger demand scenario in 2025, we will be able to deliver even better results. I would now like to highlight the progress in 2024 of some key elements of our strategy. As we are all aware, the world is transforming fast. Speaker 200:03:05The understanding and use of new technologies such as AI and machine learning and immense power of data are accelerating the pace of change. As a company, we are focusing on both developing and adopting digital tools and reinforcing the culture to adopt them. Throughout 2024, we made significant strides in digital transformation, aligning technology with our strategic objectives to enhance efficiency and innovation. We developed initiatives focused on the digitalization of operations, introduced a user centered service model to improve customer interactions and AI driven solutions play a growing role in the company's evolution. Additionally, data management and automation played an increasingly crucial role in optimizing supply chain efficiency, modernizing logistic processes, streamlining operations and reinforcing our commitment to continuous improvement. Speaker 200:03:59However, all of these technology adoption and data reliance brings its own challenges. Cybersecurity is paramount in the process of digital transformation. During 2024, we focused our efforts on strengthening the protection of operational technologies by increasing the maturity of industrial network. We also consolidated information security committee composed of representatives on various management positions to ensure a comprehensive approach to digital bridge management. These efforts culminated in a major milestone as we became the first Peruvian cement company to obtain an ISO 27,001 certification, the international asset allocation and the confidentiality and integrity of information. Speaker 200:04:42Another important pillar of our strategy is to continue to develop and strengthen our building solutions. During 2024, we have two significant projects towards this goal. First, we designed an innovative solution for riverbank protection that are traditionally done with steel and rocks. But in their parts of the North where rocks are not readily available, we signed a new solution using mainly cement, local materials and mortar is both more cost effective and more durable. Secondly, we executed the reconstruction of the two runways and the perimeter fence of the Pure Airport, not only as a concrete and pavement provider, but directly involved in the construction as part of the construction. Speaker 200:05:25The way in which we approach this project is different from other airport improvement projects we have provided concrete for in the past. Since in this case, we actively participated in every step, beginning with the prospects and ending with actual delivery of the finished infrastructure project. This involvement in every step of the process has brought invaluable insights and learning opportunities, albeit at some additional costs. We remain really confident that value added building solutions are a wrap forward for our company, and we will continue learning, adjusting and improving in this journey. Finally, I would like to briefly mention some advancement and recommendations in terms of sustainability. Speaker 200:06:06We are extremely pleased to be the first Peruvian cement company to obtain an environmental forest decoration from the global EPD program for three of our cement plants, representing an estimated 75% of our current portfolio. Verified by INO, this international certification provides full transparency on the environmental impact of our products throughout the lifecycle, reaffirming once more our leadership in sustainability and our commitment to responsible construction. In addition, we are honored to have been included for the fifth consecutive year in the sustainability effort by S and P and have maintained our position as industry leaders in the Merck Responsibility ESG ranking for the ninth year in a row. This evaluation, which considers environmental impact, social responsibility, ethics and corporate governance, places us in the top 10 more responsible companies in the country. These recognitions reinforce our dedication to sustainability and drive us to continue embedding it at the core of our business strategy. Speaker 200:07:12I will now turn the call over to Manuel to go Speaker 300:07:14to financial finance. Thank you, Humberto. Good morning, everyone. This quarter revenues increased 3% compared to the same period of 2023, reaching $526,700,000 During this same period, the gross profit decreased 2.1% when compared to the same period of previous year, mainly due to higher costs related to the execution of the fuel airport project. Consolidated EBITDA was $142,500,000 this quarter, and the EBITDA margin was 27.18.7% and a 3.4 percentage point decrease, respectively, when compared to the adjusted EBITDA and a nineteen point two percent and three point seven percentage point increase, respectively, when compared to a consolidated EBITDA of the same period of 2023. Speaker 300:08:13For the whole year of 2023, revenues increased 1.4%, consolidated EBITDA increased 14% and the EBITDA margin also increased 3.3 percentage points when compared to the same period of last year. These positive results, as Humberto mentioned, are the outcome of a smart pricing strategy and a solid operating efficiencies. Due to the operating expenses, administrative expenses for the fourth quarter of twenty twenty four increased 169.2% in 2024 when compared to the same period of the previous year, respectively, mainly due to increased personnel expenses because of a larger workforce as well as a higher workers profit sharing and third party services related to renewal fees for mining concession, software and licenses among others. Selling expenses during this quarter increased 34.817% in the 2024 compared to the fourth quarter and 2023, respectively, mainly due to the increase in personnel expenses because of a larger worker force as well as a higher workers' profit sharing, advertising and promotion as well as software and licenses. Moving on to the different segments. Speaker 300:09:39Sales of cement increased 1.8% this quarter when compared to the same period of 2023, mainly due to an increase in average prices. The gross profit of this period also increased 1.9% and the gross margin remained flat when compared to the fourth quarter of twenty twenty three. For the whole year of 2024, sales of cement decreased 2.2% when compared to the whole year 2023, mainly due to a decrease in demand from the self construction segment. Nonetheless, due to our continued focus on efficiencies, the gross profit increased 7.6% and the gross margin increased 4.1 percentage points in 2024 when compared to 2023 mainly due to cost optimization. During this quarter, concrete payments and mortar sales increased 30.948.8% for the whole year 2024 when compared to the same period of 2023, mainly due to increased sales volume of payment for the Pura Airport project, Amaladols. Speaker 300:10:54Gross margin decreased during this quarter and the whole year mainly due to increased costs related to execution of the Pura project, Tura Airport project. There is a difference in exchange rate between the rate projected in the contract versus the real exchange rate as well as additional costs incurred because of the extension of the project beyond our planned execution period. As Humberto mentioned before, we remain confident that developing a new solution is the right path for our company, even if it entailed some additional costs in the short term. Regarding precast materials sales and gross margin for the fourth quarter twenty twenty four were mostly in line with the fourth quarter of twenty twenty three. During 2024, pre cash sales increased 18% compared to twenty twenty four twenty twenty three, mainly due to increased demand from the public sector. Speaker 300:12:01Moreover, gross margin increased 10.7 percentage points when compared to 2023, mainly due to the dilution of fixed costs because of this higher sales volume. Moving back to our consolidated result, the net profit increased 39.3% this quarter and 17.8% for the whole year when compared to the same period of last year, respectively, mainly due to increased operating profit as mentioned before as well as to the impairment loss of our vertical teams included in the twenty twenty three results. Finally, in terms of debt, our net debt to EBITDA ratio was 2.7 times below the level obtained the previous quarter as we continue deleveraging. As Humberto mentioned, I have decided to step down as CFO as of March 31. Pacasmayo has been my home for the past seventeen years as we surely miss it. Speaker 300:13:13But it is time for the next generation to step forward as the greatest legacy we can leave is a team of well prepared and talented individuals. Kelly Hayashi has worked for Pacasmagio for the last twenty years since her internship, and I have worked closely with her for last past five years. I am confident that she is more than ready to take off the challenge. I want to thank each and every one of you for your trust in me as CFO and in our company throughout this time. Operator, can we please now open the floor for questions? Operator00:13:59Thank you. So we'll now move to the question and answer Okay. Our first question comes from Marcelo Ferland from Itau. Please go ahead. Speaker 400:14:25Hi, everyone. Can you hear me? Yes, please go ahead. Okay. Thank you guys for taking my questions. Speaker 400:14:32So I have a couple of questions here. The first is related to sales volumes for 2025. I mean, when we see the volumes in this 4Q, it grows by 2% year over year. And actually, when you compare the second half, sales volumes in 2024, it increased by 14% versus the first half of last year. So on top of that, I'd like to have more color of what are you guys expecting for sales volumes in 2025? Speaker 400:14:59This is my first question. The second question is if you guys could please give a little bit more detail regarding the higher cost and expenses that you guys have in the fourth Q, this would help as well. And finally, my third question is related to capital allocation ahead. So what are guys forecasting for CapEx in 2025? And also what are you guys forecasting for maybe raising shareholders return and so on and so forth? Speaker 400:15:26So that's pretty much it. Thank you. Speaker 200:15:29Sure. As we mentioned, I mean, the last quarter we saw for the first time in 2024 an increase compared year to year. So we believe the volumes should show a positive trend on 2025, probably on the same positive numbers that we saw on the last quarter of twenty twenty four. Regarding the CapEx question you had, our sustaining CapEx remains at $100,000,000 more or less. We don't see any additional CapEx in this coming year or year 2026. Speaker 200:16:03I think we are well prepared to deliver all the demand that will be showing up. And in terms of higher costs and expenses, I mean, I think I would like to drive your attention, Matt, to in the end, we finished EBITDA margin at a level, which we think is very good. But more than good and competitive, it's very sustainable. Of course, we have had some increased cost in terms of we have more personnel, the company is growing and everything. We also have some increased cost because of profits are in companies that's according to the law. Speaker 200:16:37But in the end, the way you have to see, look at it is, I mean, I think EBITDA margin, which we closed the year, is the one that we should be sustained towards the future. Speaker 400:16:48Okay. Thank you so much, guys. Operator00:16:55Okay. Thank you. Our next question comes from Adrian Huerta from JPMorgan. Please go ahead. Speaker 500:17:05Thank you. Hi, Umberto and Manuel. And Manuel, best wishes on whatever you do. It was Operator00:17:11a privilege to work with Speaker 500:17:12you all these years, Manuel. My question is on just on energy cost. You can just tell us how your energy cost per ton behave during 2024 and what we could expect for this year, Humberto? Speaker 300:17:32Energy cost, hello, again, thank you. Energy cost 2024 has gone down compared with 2023 and we expect should be flat for 2025. Speaker 500:17:44And just remind me what are the main Speaker 300:17:49fuels that you use? For the kilns, we use coal, antracite coal, local coal. And basically for the mills, we use electricity. Speaker 500:18:06And you have fixed cost on that coal? Speaker 300:18:11No, in coal we buy local coal. And basically, I would say it's quite steady the price. We don't have a contract, we buy on spot. But we are a main buyer in Peru. So basically, I would say it's quite steady with price. Speaker 300:18:30And for electricity, yes, we have a long term contract. Speaker 500:18:34Perfect. And just follow-up on the previous question cement volumes for this year. Can you elaborate just a little further on those positive trends that we saw in 4Q that could continue into this year? By segment, how do you see the different segments, residential, nonresidential, infrastructure? How do you see and which should be the main drivers for this year for volumes? Speaker 200:18:59Sure, Adria. I'm going to answer the question on volumes from a different angle than the segments you're asking me. I mean, for us, since 80% of our sales go to self construction, the key proxy for us is employment. People have to be fully employed. We just closed last year our agriculture exports at a record level, dollars 12,000,000,000. Speaker 200:19:20That means, I mean, lots of thousands of people employed, very well employed and actually well paid. That's why this year has begun so strongly and that's why the aid of last year was so strong. Fishing also had a fantastic first season of the year. So all these things convey a potential residential demand that should be absolutely positive side compared to last year. Second, we have just a new Minister of Economics appointed two weeks ago. Speaker 200:19:47Even though he's not a space engineer in economics, he comes from a long and a very successful career in building infrastructure. So I think we already see that he has come in very strong in terms of unlocking some projects. So I think also from infrastructure level, we're going to see the central and regional government spending much more. So as we stand, we closed last year at a very high note in terms of volumes. This year has opened in similar tones and all these things just make us feel very optimistic about volumes. Operator00:20:32Our next question is from Marianne Gonye from Why has the number of employees increased? Is it due to a specific project? Speaker 200:20:45Yes. I mean, when we talk about the internal numbers, I mean, it has to do a lot with specific projects. Sometimes, I mean, like we do the Pura project, so we hire a bunch of people, but the other project will be out. It has to do with that. I mean, in the ready mix business, depending on the project, now we have the Chavimostik irrigation, we have the Yanacocha project. Speaker 200:21:06Those things are really temporary and growing in increasing terms of increasing people that are going to stay for good. That's still increasing but probably at a level of maybe 10 or 15 people a year, not a lot. Operator00:21:26Okay. Thank you. We have a question from Francisco Suarez from Scotiabank. Please go ahead, Francisco. Speaker 600:21:37Thank you so much. Good morning, gents, and congrats on the results. And Manuel, on a personal note, thank you for all your wonderful effort. It was quite a ride, and thank you so much for everything. Best wishes as well. Speaker 600:21:51The question I have is relates with overall utilization on I mean, you have reached levels that usually in the future may lead to a downward trend. Are you still optimistic on your overall utilization rates on your cement operations? And the second question that I have is, if you can walk me a little bit through what are the structural features that make you think so bullish on your ability to maintain the current margins? Thank you. Speaker 200:22:29Thank you, Francisco. I mean, I think right now, we're in terms of clinical at 70% utilization capacity. We are very confident we're okay with that. Also, we have to bear in mind, we keep lowering our clinker factor probably in the next couple of years. We should be somewhere around 67%, sixty eight % as we are increasing capacity. Speaker 200:22:49And in terms of cement utilization mills with regard to 60%. So yes, I think we are not concerned at all about capacity. And in terms of EBITDA margins, I think Adrienne made a very important question before. Energy costs, which are a fundamental part, have been flat over the last two years. If you add to that personnel cost, which go up with inflation, that really allows us to be very confident that the margins should be maintained. Speaker 200:23:15Our pricing policy has been very efficient over the last years. And I think those three factors allow us to think that EBITDA margin is going forward should be maintained. If anything, I mean, if the volumes pick up more than we expect, maybe you should see a little bit of improvement there. Speaker 600:23:33And if I may, and thanks for your complete answer. You rose one thing that touched my attention. Clincare factors, what are the drivers behind improvement? What type of additions are you envisioning in addition to slag? Is any anything happening on that front that explains that such improvement? Speaker 600:23:55Thank you. Speaker 200:23:55Yes. We are mono slag. I mean, we're having focusing heavily in porcelain materials also in raw lime. I think those are the main drivers that are really driving our shrink-wrap so lower. And more than that, Francisco, I mean, we have a single product with 60% clinker factor. Speaker 200:24:15It's a commercial issue. The thing is, I mean, there are some cements that are required by government with a clinker factor of 90%. So we're trying to change the frame of mind of people to understand that other cement to lower critical factor are as good as the ones like the Cement Type one. It's not so much only production. It's also a very strong effort on commercial side to move our portfolio on average to our lower clean Operator00:24:52Okay. Thank you. We'll wait a moment or two for questions to come in. So we have a question from Luis Ramos from La Rangel. Hi, everyone. Operator00:25:18Thanks for taking my questions. First, how vulnerable is this projected recovery on the cement volumes in 2025, particularly considering the increase in security and upcoming elections? Second, could you provide us more color on these costs overruns in the Kyuta Airport? How long will these negative effects last on gross margins? Speaker 200:25:43Thank you for the question. In terms of vulnerability, I don't think the upcoming elections are vulnerability. I do think that increasing security may be a vulnerability because 80% of our market is just construction and we still need to get out to work. So yes, I don't think upcoming elections are an issue. I think in security, it has been there for the last two years. Speaker 200:26:07I don't see it getting any worse than it has been. So I think that's a flat thing. In terms of PURA, first of all, all the cost overruns are already in the results. I mean, there's nothing coming into the future. Everything has gone under the bridge now. Speaker 200:26:22And as we fundamentally, like Manuel mentioned in his speech, exchange rate, we projected exchange rate that didn't happen. Point number two, we had overruns in terms of time. We should have completed the project some months before that we are actually completing it. And this negative effect, like I said, they would have no effect in gross margin in the future. This is a project that's already it's almost done. Speaker 200:26:45So the way we see it is, I mean, this year, we should be our revenues of $500,000,000 coming from Building Solutions. One of the key positioning factors of us has been that we are more than just a commercial segment. And I think some things take a learning curve. I think the peer effort was one of them. But luckily, we're able to deliver the project in the end at a regional cost, but all this has already been taken care of in the 2024 results. Operator00:27:18Okay. Thank you. We had a text question from Gabriel Perez from Credit Corp. He has two questions. I'll start with the first one. Operator00:27:30Could you give us more color on your expectations regarding 2025 in terms of cement deliveries and EBITDA margins? Speaker 200:27:38Yes. I think I've answered that before. I think the color should be the trend of we saw in the last quarter of twenty twenty four is the one that should be going forward. And in terms of EBITDA margins, we should be able to keep the high EBITDA margin we achieved at the end of twenty twenty four. Operator00:27:59Okay. Thank you. And the next question from Gabriel. Given new projects like the Cenas Liberinas, where we should expect higher concrete sales, do you believe gross margin could be lower than 2024? Speaker 200:28:14I think what we're going to expect in terms of concrete sales, I mean, we have a huge Pianacosa project coming in this year. Jarimotchi project should come in towards the end of the year. We see there already mix. And like I mentioned before, and I'll say once more, EBITDA margins should remain at the level we saw at the end of twenty twenty four. Operator00:28:38Okay. Thank you. We are not seeing any more questions. Thank you, everyone, who has sent questions. So perhaps I can hand it back to Mr. Operator00:28:45Humberto Nadal for concluding remarks. Speaker 200:28:48Thank you, everyone, for participating today. And today, indeed, is a special call for all of us here in Pacasmayo for me, especially as my dear friend is joining me for the last time. I would like to close on a more personal note because my military term is in fact, I would say, a very significant milestone for our company. Succession is never easy because it involves people, it involves human feelings, besides the expectations, but it is clearly necessary. It is one of the greatest tests and ultimately the greatest demonstration of our professionals to recognize when it's time to pass the torch and to ensure it is placed in the right hands. Speaker 200:29:27While leadership may change, the essence of this company remains absolutely unchanged, built on the dedication, values and vision that each of us upholds. Manuel has exemplified in a way I've never seen before this period for seventeen extraordinary years, leaving a lasting impact that will guide us over. On behalf of all of us in Pacasmayo and especially on my own behalf, we thank you for your leadership, your integrity, your uplifting spirit and all the lessons you have shown us over these seventeen years. You will always be part of this company's story and we wish you nothing but the very best in this next chapter. We need to meet you very much, my dear friend. Speaker 200:30:07With that in mind, thank you very much, everybody, for joining us today in the call. We close a record year. And hopefully, this year, as we did on 2024, we will be able to get even better results. Thank you so much for your new interest in our corporate. Have a very nice day. Operator00:30:27That concludes the call for today. Thank you and have a nice day.Read morePowered by