Group 1 - Cementos Pacasmayo (NYSE: CPAC) reported positive Q1 2025 results, driven by increased demand from consumer self-construction and infrastructure projects [1] - The company experienced higher capacity utilization during the quarter, indicating operational efficiency [1] Group 2 - The focus of the analysis is on long-term operational aspects and earnings power of companies rather than market-driven dynamics [1] - The investment strategy emphasizes holding companies for the long term, with a preference for providing information that aids future investors [1]

1Q25 Quarterly Conference Call Presentation CONTENT 01 Quarterly Highlights 02 Our Strategic progress 03 Financial Highlights Our strategic progress Quarterly Highlights S/ 499.2 4.8% Compared to 1Q24 27.0% 0.9 p.p Compared to 1Q24 S/ 134.7 million 1.4% Compared to 1Q24 SALES VOLUME SALES OF GOODS EBITDA million EBITDA MARGIN Building Solutions Coprocessing Financial Highlights Sales Evolution Gross Profit Evolution EBITDA Evolution Administrative Expenses Selling Expenses Cement Debt and Leverage Total Adj ...

Macroeconomic Conditions - The company is significantly affected by global macroeconomic conditions, particularly due to its reliance on exports to the United States, China, and Europe, which could impact demand for its products [24]. - The ongoing geopolitical tensions, including the Russia-Ukraine conflict, have led to increased inflation and volatility in global markets, adversely affecting the company's financial condition [29]. - Political instability in Peru, including potential impeachment motions against President Boluarte, could lead to unpredictable economic policies that may adversely affect the business [40]. - The Peruvian economy is highly susceptible to fluctuations in regional and global markets, which could adversely affect cash flows and securities, impacting the company's financial condition [55]. - The cement sector's performance is closely tied to macroeconomic variables such as GDP growth, domestic demand, and public spending, which could be adversely affected by prolonged global economic conditions [25]. Inflation and Costs - In 2024, inflation in Peru was recorded at 2.1%, below the previous five-year average of 4.4%, but future inflation rates may rise due to supply shocks and geopolitical conflicts [47]. - As of December 31, 2024, 20.5% of the company's costs were denominated in U.S. dollars, exposing it to currency mismatch risks, especially with potential depreciation of the Peruvian sol [44]. - Global freight prices have shown volatility, impacting the cost of raw materials sourced internationally, which could affect the company's operations [34]. - The cost of electricity represented approximately 14.3% of cement production costs, while coal accounted for about 17.0%, indicating significant exposure to energy price fluctuations [69]. - The company experienced a disruption in energy supply at the Rioja facility in 2023, lasting around seven weeks, which increased operational costs due to reliance on coastal plants for cement supply [70]. Competition and Market Dynamics - The company faces increased competition from Holcim Ltd., which entered the Peruvian market by acquiring two local companies, potentially affecting market share and profitability [61]. - The company has developed a strong retail distribution network with 289 independent retailers and 315 hardware stores as of December 31, 2024 [131]. - In 2024, the company shipped approximately 2.8 million metric tons of cement, concrete, and precast products, capturing an estimated 22.8% market share of total cement shipments in Peru [129]. - The retail cement sector in Peru is characterized by households investing a significant portion of their savings in home construction, known as auto-construcción [212]. Construction Sector Insights - In 2024, auto-construcción accounted for approximately 74.8% of the company's cement sales, highlighting the dependence on residential construction in northern Peru [65]. - Approximately 15.3% of cement sales in 2024 were derived from private construction, and 9.9% from public construction in northern Peru, emphasizing the importance of construction projects for revenue [67]. - The anticipated increase in Peru's large infrastructure projects has been delayed, with a budget of S/25.7 billion (US$7.6 billion) for reconstruction works due to Coastal El Niño, which may affect future public spending [68]. - The construction sector in Peru grew by 3.5% in 2024, indicating potential for future growth in cement demand [133]. Financial Performance - Gross profit for 2024 was S/728.5 million, with a gross profit margin of 36.8%, an increase from 35.4% in 2023 [133]. - EBITDA for 2024 reached S/549.3 million, resulting in an EBITDA margin of 27.8%, up from 24.7% in 2023 [133]. - The company reported a net profit of S/198.9 million in 2024, translating to a profit margin of 10.1% [133]. - Total net sales for 2024 were S/1,978.1 million, compared to S/1,950.1 million in 2023, indicating a growth of approximately 1.4% [168]. Environmental and Regulatory Factors - The company is subject to various environmental regulations, and any violations could result in substantial fines and operational disruptions [87]. - The company has been included in the Dow Jones Sustainability Index for the fifth consecutive year, highlighting its commitment to sustainability [128]. - The EcoSaco, a new cement bag that disintegrates within the concrete mix, won multiple awards for its sustainability impact, including the Semana Economica ESG Sustainability Prize [164]. - In 2024, the company implemented Environmental Product Declarations (EPDs) for its cement products, aligning with Peru's Sustainable Building Code [175]. Strategic Initiatives and Future Outlook - The company may pursue future acquisitions to diversify its product portfolio and expand geographically, but these acquisitions could expose it to new risks and may not achieve expected benefits [75]. - The company aims to selectively pursue strategic acquisitions to expand its geographic footprint and diversify its product portfolio [160]. - The company has implemented ISO 37001 and ISO 37301 certifications to strengthen its enterprise risk management and anti-bribery practices [162]. - The company has established four strategic objectives for community relations, focusing on trust-building and improving local infrastructure, with no community conflicts reported in 2024 [154]. Operational Challenges - The company faces risks from illegal mining activities in Peru, which pose environmental and economic challenges, potentially impacting its operations [38]. - Failures in information technology and cybersecurity systems could adversely impact the company's operations and reputation, as these systems are critical for efficient management [98]. - The company has local bonds due in 2029 and 2034, and a "club deal" loan from 2021, which contain covenants limiting additional indebtedness if certain financial ratios are not met [77]. - Significant capital expenditures are required to expand cement production capacity and distribution network, and the company may face challenges in obtaining necessary funding [76].

Financial Data and Key Metrics Changes - Revenues increased by 4.8% year over year, reaching $499.2 million, driven by stronger demand for bagged cement and concrete for infrastructure projects [4][11] - Consolidated EBITDA rose to $134.7 million, a 1.4% increase compared to the same period last year, despite higher expenses related to collective bargaining negotiations [4][11] - Net profit increased by 6.5% year over year, attributed to higher revenues and gross profit, along with a slight reduction in financing expenses [15] Business Line Data and Key Metrics Changes - Cement sales increased by 3.9% year over year, primarily due to increased demand [13] - Sales of concrete, pavement, and mortar surged by 22.3% year over year, driven by major infrastructure projects [5][13] - Precast material sales grew by 6.8% compared to the previous year, mainly due to increased sales volume to the public sector [14] Market Data and Key Metrics Changes - The company is experiencing a solid recovery in demand for construction materials, particularly in Northern Peru, where it has positioned itself as a preferred choice for infrastructure development [6][7] - The execution of significant infrastructure projects is expected to secure stable demand moving forward [5][6] Company Strategy and Development Direction - The company is focused on a long-term strategy to expand the use of concrete and related products, emphasizing early involvement in projects and leveraging technology to identify opportunities [6][7] - A decarbonization strategy is being implemented, with a focus on reducing coal usage and exploring cleaner alternatives such as biomass and end-of-life tires [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining positive momentum for the rest of the year, despite challenges such as weather impacts on sales [4][5] - The company anticipates an increase in concrete volumes for the remainder of 2025, supported by ongoing infrastructure projects [28] Other Important Information - Administrative expenses increased by 22.4% year over year, primarily due to personnel expenses related to union bonuses [12] - The net debt to EBITDA ratio improved to 2.6x, indicating continued deleveraging efforts [15] Q&A Session Summary Question: Is it worth continuing the sales of concrete pavements, precast, and construction supplies when you barely make any money on it? - Management emphasized that the overall company strategy focuses on building solutions, which justifies the continued sales despite lower margins in some areas [17][19] Question: Should we expect a similar year-over-year increase in SG&A in the coming quarters? - Management clarified that the $9 million external expense is a one-time occurrence, and EBITDA margins should remain stable for the rest of the year [22][25] Question: Do you expect to maintain this level of concrete volumes for the whole of 2025? - Management indicated that concrete volumes are expected to increase for the remainder of the year due to ongoing projects [28] Question: Will dividends be considered for capital allocation going forward? - Management confirmed a solid dividend policy will be maintained while also focusing on reducing debt [31] Question: Will the production and sale of lime continue to be reported? - Management stated that lime production will continue, although it may not be reported as a separate segment due to its materiality [32]

Cementos Pacasmayo (CPAC) Q1 2025 Earnings Call April 29, 2025 10:00 AM ET Company Participants Claudia Bustamante - Investor Relation ManagerHumberto Nadal Del Caprio - CEOEly Hayashi - CFONatalia Leo Paniagua - Equity Research Associate Conference Call Participants Marcelo Furlan Palhares - Equity Research Analyst Claudia Bustamante The call over to your questions. Please note that this call will include certain forward looking statements. These statements relate to expectations, beliefs, projections, tre ...

Financial Position - As of December 31, 2024, total assets decreased to S/3,166,043, down from S/3,221,735 in 2023, reflecting a decline of approximately 1.7%[30] - Current assets remained stable at S/992,496, slightly increasing from S/992,249 in 2023[30] - Total liabilities decreased to S/1,952,945, down from S/2,031,727 in 2023, representing a reduction of about 3.9%[30] - The company reported a total equity of S/1,213,098, an increase from S/1,190,008 in 2023, reflecting a growth of approximately 1.9%[30] - Cash and cash equivalents decreased to S/72,723 from S/90,193 in 2023, a decline of about 19.4%[30] - The Group's total assets in US dollars amounted to US$11,490,000 in 2024, up from US$9,146,000 in 2023[145] - The net book value of property, plant, and equipment as of December 31, 2024, is S/2,031,139,000, reflecting a decrease from S/2,099,351,000 in 2023[158] Profitability - Sales of goods for 2024 reached S/(000) 1,978,071, a slight increase of 1.4% compared to S/(000) 1,950,075 in 2023, but a decrease of 6.5% from S/(000) 2,115,746 in 2022[31] - Gross profit for 2024 was S/(000) 728,526, representing a 5.7% increase from S/(000) 689,452 in 2023 and a 11.7% increase from S/(000) 652,031 in 2022[31] - Operating profit improved to S/(000) 391,033 in 2024, up 15.7% from S/(000) 337,555 in 2023, but down 1.2% from S/(000) 355,318 in 2022[31] - Profit for the year increased to S/(000) 198,875 in 2024, a rise of 17.7% compared to S/(000) 168,900 in 2023, and a 12.5% increase from S/(000) 176,828 in 2022[32] - Basic earnings per share rose to S 0.46 in 2024, up from S 0.39 in 2023 and S 0.41 in 2022, reflecting a 17.9% increase year-over-year[31] Cash Flow - Net cash flows from operating activities for 2024 were S/(000) 321,141, a decrease of 22.1% from S/(000) 412,323 in 2023, but a significant increase from S/(000) 111,819 in 2022[36] Expenses - The company’s total operating expenses decreased to S/(000) 337,493 in 2024, down from S/(000) 351,897 in 2023, reflecting a reduction of 4.1%[31] - The company’s finance costs for 2024 were S/(000) 100,308, a decrease of 3.5% from S/(000) 104,045 in 2023[31] - Administrative expenses for 2024 totaled S/253,383,000, up from S/231,967,000 in 2023, reflecting an increase of approximately 9.2%[198] - Selling and distribution expenses rose to S/81,410,000 in 2024, compared to S/69,569,000 in 2023, marking an increase of around 17.0%[199] - Employee benefits expenses for 2024 were S/338,921,000, which is an increase from S/292,032,000 in 2023, representing a growth of approximately 16.1%[200] Taxation - The income tax expense for 2024 was calculated at an effective rate of 33%, totaling S/97,312,000, compared to S/76,808,000 in 2023[187] - The Company has tax loss carryforwards amounting to S/92,998,000 as of December 31, 2024, up from S/44,868,000 in 2023[188] Assets and Liabilities - The total carrying amount of trade and other accounts receivable is S/135,114,000, with an expected credit loss of S/11,486,000, representing an 8.5% expected credit loss rate[155] - The total inventory as of December 31, 2024, amounts to S/773,997,000, with a provision for inventory obsolescence of S/33,880,000[156] - Trade receivables increased to S/95,419,000 in 2024 from S/83,840,000 in 2023, indicating a growth of approximately 13.5%[148] - The allowance for expected credit losses rose to S/20,520,000 in 2024 from S/18,048,000 in 2023, reflecting an increase of 8.2%[153] - Trade payables decreased to S/(000) 96,549 in 2024 from S/(000) 107,327 in 2023, representing a decline of approximately 10.5%[164] Corporate Governance - The Company has complied with all financial covenants as of December 31, 2024, and 2023, without any activation of covenants due to non-compliance[181] - The Company maintained a fixed charge covenant ratio of at least 2.5 to 1 and a consolidated debt-to-EBITDA ratio of no greater than 3.5 to 1[182] Investments and Acquisitions - The Group acquired coal concessions in January 2023 for S/34,350,000, enhancing its exploration activities in areas of interest to the cement business[161] Dividends - Declared dividends per share for 2024 remained at S/.0.41000, consistent with 2023, while total declared dividends amounted to S/175,524,000[193]

Group 1 - The company's margins expanded during the year and quarter due to higher utilization of concrete projects [1] - The company announced more large infrastructure projects starting from FY25 in 3Q24, with confirmations expected in 4Q24 [1] Group 2 - The focus of the analysis is on operational aspects and long-term earnings power of companies rather than market-driven dynamics [1] - The investment strategy emphasizes holding companies independently of future price movements, with most calls being holds [1]

Group 1 - The conference call for Cementos Pacasmayo S.A.A. (NYSE:CPAC) Q4 2024 earnings took place on February 14, 2025, at 9:00 AM ET [1] - Key participants included CEO Humberto Nadal, CFO Manuel Ferreyros, and Investor Relations Manager Claudia Bustamante [3] - The call was structured to begin with an overview from the CEO, followed by financial commentary from the CFO, and concluded with a Q&A session [3] Group 2 - The company emphasized the importance of strategic outlook for both the short and medium term during the call [3] - Forward-looking statements were mentioned, indicating that expectations and projections are subject to risks and uncertainties [4]

Financial Data and Key Metrics Changes - In Q4 2024, revenue increased by 3% year-over-year, reaching PEN 526.7 million, while gross profit decreased by 2.1% due to higher costs related to the Piura airport project [19][20] - For the full year 2024, revenues increased by 1.4%, and consolidated EBITDA reached a record PEN 549.3 million with an EBITDA margin of 27.8% [8][20] - The net profit increased by 39.3% in Q4 and by 17.8% for the entire year compared to the previous year [27] Business Line Data and Key Metrics Changes - Cement sales increased by 1.8% in Q4 2024 compared to the same period in 2023, while for the full year, cement sales decreased by 2.2% due to lower demand from the self-construction segment [22][23] - Concrete payments and mortar sales surged by 30.9% and 48.8% for the full year 2024, primarily driven by increased sales volume for the Piura airport project [23] - Precast material sales increased by 18% in 2024 compared to 2023, with gross margin improving by 10.7 percentage points due to higher sales volume [26] Market Data and Key Metrics Changes - The company noted a positive trend in sales volumes for 2025, expecting similar growth rates as seen in Q4 2024 [36] - The company highlighted that 80% of its sales are directed towards self-construction, making employment levels a key indicator for demand [49] Company Strategy and Development Direction - The company is focusing on digital transformation, enhancing operational efficiency through AI and machine learning, and has achieved ISO 27001 certification for information security [10][13] - The company is committed to developing value-added building solutions, with significant projects like the Piura airport reconstruction, which involved direct participation in construction [14][16] - Sustainability remains a core strategy, with the company being the first Peruvian cement company to obtain environmental product declarations for three plants, representing 75% of its portfolio [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving better results in 2025 due to a stronger demand scenario and ongoing strategic initiatives [8][9] - The new Minister of Economics is expected to unlock infrastructure projects, which could further boost demand [51] Other Important Information - The CFO, Manuel Ferreyros, announced his retirement effective March 31, 2025, after a 17-year tenure, with Eli Hayashi set to succeed him [6][27] Q&A Session Summary Question: Expectations for sales volumes in 2025 - Management expects positive trends in sales volumes for 2025, similar to Q4 2024 [36] Question: Details on higher costs and expenses in Q4 - Increased costs were attributed to a larger workforce and higher personnel expenses due to company growth [38] Question: Capital allocation and CapEx forecast for 2025 - Sustaining CapEx is projected to remain around PEN 100 million, with no additional CapEx expected in the coming years [37] Question: Energy cost behavior in 2024 - Energy costs decreased in 2024 compared to 2023 and are expected to remain flat in 2025 [43] Question: Impact of upcoming elections on cement volume recovery - Management does not foresee upcoming elections as a significant risk to volume recovery, although security concerns may affect operations [71] Question: Cost overruns in the Piura airport project - All cost overruns have been accounted for in the results, and no future negative effects on gross margins are expected [72]

Group 1 - Pacasmayo (CPAC) is part of the Construction group, which consists of 88 companies and is currently ranked 8 in the Zacks Sector Rank [2] - Pacasmayo has a Zacks Rank of 2 (Buy), indicating a positive earnings outlook with a 30.6% increase in the consensus estimate for full-year earnings over the past quarter [3] - Year-to-date, Pacasmayo has returned 27.2%, outperforming the average return of 24.7% for Construction companies [4] Group 2 - Pacasmayo operates within the Building Products - Concrete and Aggregates industry, which includes 8 companies and is ranked 174 in the Zacks Industry Rank [5] - The average return for stocks in the Building Products - Concrete and Aggregates industry is 16.6%, indicating that Pacasmayo is performing better than its peers [5] - Emcor Group (EME), another strong performer in the Construction sector, has seen a year-to-date increase of 139.4% and has a Zacks Rank of 1 (Strong Buy) [4][5] Group 3 - The Building Products - Heavy Construction industry, to which Emcor Group belongs, is ranked 36 and has increased by 104.9% this year [6] - Investors should monitor both Pacasmayo and Emcor Group for potential continued strong performance in the Construction sector [6]